"Oil, natural-gas and agricultural prices rose as escalating tensions over Ukraine threatened to disrupt flows of natural resources from Eastern Europe to world markets.
Futures for Brent crude, the benchmark in international energy markets, added $1.45 a barrel, or 1.5%, to settle at $96.84 and earlier climbed to $99.50, their highest level since 2014. The International Energy Agency said it was working with member countries -- which include the U.S. but not Russia or Saudi Arabia -- and partners to ensure there was enough oil on the market to meet demand.
In Europe, natural-gas prices rose 10% to 80 euros, equivalent to $91.65, per megawatt-hour after Germany halted the Nord Stream 2 pipeline in response to Russian aggression against Ukraine. The submarine pipe linking Russia to Germany has yet to funnel gas to customers of Gazprom PJSC, but traders worry the state energy company will cut exports via other routes if Nord Stream 2 is canceled.
U.S. natural-gas prices also rose Tuesday, though the move was less pronounced than in Europe. Futures gained 6.70 cents, or 1.5%, to $4.4980 per million British thermal units.
Prices for wheat, grown in large quantities in Russia and Ukraine, rose as well. Aluminum and nickel, of which Russia is a big producer, rose in early trading before shedding gains on the London Metal Exchange.
President Biden rolled out what he called a first round of sanctions over Russian President Vladimir Putin's movement of troops into two breakaway regions of Ukraine. The U.S. penalties target two Russian financial institutions, sovereign debt and elite individuals.
Elsewhere, Germany moved swiftly to stop certification of the Nord Stream 2 pipeline. A pickup in flows of gas from Russia to Europe is unlikely with Nord Stream 2 on hold, analysts and traders say. Without extra Russian gas, the region faces a battle to build adequate supplies of the power-generation and heating fuel before the 2022-23 winter.
State supplier Gazprom PJSC reduced flows through alternative routes to Europe in recent months, a move that met its contractual commitments but also pushed prices to record highs. Last year, the Kremlin tied a rise in Russian exports to the startup of Nord Stream 2.
The West faces a tricky balancing act in deciding which other restrictions to impose on Russia, and when. Hitting the sector that would most damage the Russian economy -- oil and gas -- would also cause the biggest problems in the U.S. and Europe. Companies, governments and voters there already are grappling with the highest energy prices in years.
Natural-gas markets are highly exposed to any snags in flows from Russia. Europe met 38% of its gas needs with imports from Russia in 2020, according to the most recent official data. Prices in northwestern Europe are almost five times as high as they were a year ago. On Tuesday, Mr. Putin said that Russia would continue providing uninterrupted supplies of gas, according to a state news agency.
The first round of sanctions avoided measures that would directly disrupt Russian oil-and-gas exports.
Traders and analysts say sanctions could reverberate through the Russian economy and commodity markets in unpredictable ways, for example by making it difficult for traders to finance and pay for cargoes of Russian fuel.
Oil prices have rallied to their highest levels since the 2014 shale-induced crash after demand snapped back from pandemic lows. Stockpiles have winnowed as producers in the Organization of the Petroleum Exporting Countries, the U.S. and Russia either struggled to pump more oil or opted for restraint. There is also a risk of physical disruption to Russian oil supplies to Europe. Eastern and Central European refiners rely on Urals crude -- the main grade of crude exported by Russia -- flowing through the southern branch of the Druzhba pipeline, which runs through Ukraine to Slovakia, Hungary and the Czech Republic.
The IEA said the three countries have sufficient emergency stocks of oil to draw upon if the 250,000-barrel-a-day pipeline is obstructed. In all, Europe imports 2.7 million barrels a day of Russian crude, and 1.1 million barrels a day of refined products, according to S&P Global Platts. Russia is the third-biggest oil producer in the world, the single largest exporter of natural gas and a major producer of aluminum, nickel and other metals. Any interruption to Russian exports would strike at a vulnerable time for oil, gas and metal markets globally as buyers compete for scarce supplies.
Agricultural markets could also get upended by escalating hostilities and the West's response. Russia is the world's fourth-biggest producer of wheat, if the European Union is counted as a single producer, according to U.S. Department of Agriculture data." [1]
Starvation in wheat products consuming Arab countries leads to instability there and millions of Arab refuges in Lithuania. Give the 1000 euros for each, and they will come in mass for more. Inflation increase makes life tough for many governments in the West. There are no such problem in Lithuania, because our government is not elected, but hand picked from the circle of relatives and friends, e.g. the grandson of Vytautas Landsbergis is appointed this way as a Minister of Foreign Affairs of Lithuania.
1. Oil Prices Near $100 Mark On Threat of Ukraine War
Wallace, Joe. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 23 Feb 2022: B.13.
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