With no let-up in the Ukraine crisis, markets are still scrambling to adjust to the extraordinary new realities it is imposing across the board, with fresh developments set to keep coming day after day.
- European gas market on tenterhooks over Ukraine (00:12)
- EC weighs market intervention options (01:41)
- EU ministers to discuss carbon border charge (02:13)
- Oil market adjustment, demand fears (02:51)
With no let-up in the Ukraine crisis, markets are still scrambling to adjust to the extraordinary new realities it is imposing across the board, with fresh developments set to keep coming day after day.
First to natural gas, where markets remain exceedingly volatile after prices hit fresh record highs last week. All eyes will remain on Russian gas flows via Ukraine, which have continued unaffected so far.
However, Ukraine's gas grid operator warned last week that there was heightened risk to transit security after Russian troops entered the sites of two compressor stations.
Shelling also continues to damage key gas infrastructure in eastern Ukraine, albeit some distance from the main gas trunklines.
Adding to market pressure, gas storage sites in Europe are now only around a quarter full, with the European Commission looking to fast-track proposals on enforcing EU-wide minimum gas storage levels before next winter.
The EC last week outlined a plan to reduce EU demand for Russian gas by two-thirds by the end of this year, and is formulating plans for a complete phase-out by 2027.
European gas buyers have said they will continue importing Russian gas under long-term contracts but there are growing calls for a full European embargo on Russian gas, with French President Emmanuel Macron saying last week that "nothing is off the table" when it comes to potential new measures against Moscow.
And that takes us to our social media question for this week: Do you think the EU will follow the US in imposing sanctions on Russian energy imports? Tweet us your thoughts.
In electricity, the European Commission will be working on emergency measures to soften the impact of extreme gas prices on wholesale electricity markets. While the Commission is to report back by the end of March, it would be no surprise if details of potential price caps or mandatory sales at fixed prices leak out ahead of time.
Traders admit calls for additional capital are becoming unsupportable even if they resent market intervention on principle.
In the EU carbon market, eyes are also on Brussels where EU economy ministers are meeting Tuesday to discuss the controversial Carbon Border Adjustment Mechanism. The CBAM aims to place a charge on the carbon content of goods imported into the EU, using certificates linked to EU carbon prices.
It also aims to replace free allocation of allowances for industrial sectors to be phased in from next year.
This creates uncertainty over demand for allowances, which, as you can see in this chart, rebounded last week from a sharp sell-off.
Lastly to oil, where markets are starting to adjust to the idea of Russian isolation and higher prices, with the US and UK moving to ban Russian energy imports and some traders shunning the Urals crude grade.
Some argue that embargoes by individual countries are likely to have limited effect, with Russia able to find new markets. But there's no doubt about the near-term shock to markets and consumers.
The spike in prices in response to the Ukraine crisis has moderated after a jump up to nearly $140 per barrel at the start of last week, close to all-time highs.
A scramble for additional supply is underway, including the possibility of easing sanctions on Venezuela and Iran. This may be easier said than done with diplomatic talks on an Iran deal in Vienna appearing to suffer setbacks last week.
Meanwhile, governments, mindful of the potential for a drawn-out conflict in Ukraine, are increasingly adjusting their long-term energy strategies, with the UK planning to present a new energy strategy focused on self-reliance and boosting North Sea production in the coming days.
Examining all of this are several reports due out in the coming days: OPEC's monthly oil market report on Tuesday, followed by two reports by the International Energy Agency on Wednesday: the monthly oil market report and the medium-term outlook report, Oil 2022.
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