Energy prices surge on Ukraine with oil closing in on $100

Russia is the biggest provider of gas to Europe, about a third of which typically travel through pipelines crossing Ukraine

People from the Donetsk and Luhansk regions watch Russian President Vladimir Putin's address. Picture: AP/Denis Kaminev

Energy prices have surged after Russian President Vladimir Putin signed an order to send what he called “peacekeeping forces” to the two breakaway areas of Ukraine that he officially recognised.

European natural gas led gains in commodities, jumping as much as 13%. Brent oil was closing in on $100 (€88.42) a barrel, and German power and coal prices rose. Russia’s move is a dramatic escalation in its standoff with the West over Ukraine, with the US and the UK saying they plan to announce new sanctions as soon as Tuesday.

There were no details on how many troops might go in, or when, but a conflict could threaten Russian energy supplies. The country is the biggest provider of gas to Europe, about a third of which typically travel through pipelines crossing Ukraine, and a major exporter of everything from crude oil to refined products.

Sanctions could also disrupt energy flows, with any curbs to Russia’s ability to trade in foreign currency having the potential to upend commodity markets from oil and gas to metals and agriculture.

“This means yet higher gas prices for longer as the market has already been very nervous for months,” said Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies. “Some US, EU sanctions are likely to follow.” 

Dutch gas futures, a European benchmark, were 7.3% higher at €77.85 a megawatt-hour in Amsterdam this morning. Brent crude jumped to a high of €87.87 a barrel. German power for next year increased as much as 3.7% and European coal rose 4.4%.

Bloomberg