The Russia-Ukraine crisis could ‘spur’ gas prices in Europe

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Rising tensions between Russia and Ukraine are raising concerns in energy markets and uncertainty could lead to a prolonged period of high gas prices in Europe, analysts told CNBC.

“This is a very tight gas market and there is no doubt that this sense of impending crisis between Russia and Ukraine is affecting the market, especially since Russia supplies about 35% of Europe’s gas,” he said. Energy expert Dan Yergin on CNBC.

If the crisis escalates, gas prices in Europe – which soared last year – could soar further, warns research firm Capital Economics.

William Jackson, a senior executive at Capital Economics, noted that in addition to Europe’s dependence on Russia for gas, stockpiles are also low at the moment.

“If sanctions were imposed on Russia’s energy exports or if Russia used gas exports as a lever, European gas prices would probably skyrocket,” he said.

It is recalled that tensions between Russia and Ukraine have increased in recent months amid repeated reports that Russian troops have been concentrated on the border with Ukraine.

This development has led to speculation that Russia is preparing to invade Ukraine. Moscow, for its part, has repeatedly denied the allegations.

Talks aimed at easing tensions ended last week without any progress.

Representatives of the United States and NATO members concluded talks with top Russian officials without finding a solution, but stressed that the situation along the Ukrainian border was actually deteriorating.

The situation has sparked speculation that the United States could impose sanctions on Russia to prevent Moscow from invading Ukraine.

If that happens, according to Capital Economics, European gas prices are likely to exceed the 180 180 per MWh ceiling seen late last year.

“Some countries that are heavily dependent on Russian gas, especially in Eastern Europe, may be forced to impose restrictions,” Jackson added.

It is noted that the massive shortage of gas in Europe in the third quarter of last year led European electricity prices to high levels for many years.

However, gas supplies from Russia were already lower than usual, Jefferies said.

Gas imports from Russia to northwestern Europe from August to December were down 38% compared to the same period in 2018, according to Jefferies.

Gas reserves in Europe are down 21% from January 12, up from a five-year average, Jefferies said.


Source From: Capital

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