Ukraine crisis: Gas prices jump 10%, oil heads towards $100 a barrel

Russian President Vladimir Putin signs a document recognising the independence of separatist regions in eastern Ukraine in the Kremlin in Moscow on Monday night. 

The price of European gas has jumped 10% and global crude oil spiked, threatening to add to the inflation pressures facing businesses and households after Russia moved to recognise breakaway regions in eastern Ukraine.

Russia is a large exporter of oil and gas to western Europe, and along with Ukraine, also sells large amounts of wheat to global markets. 

The crisis appears set to increase price pressures for energy and food products at a time when inflation is already running at its highest levels in Ireland and other European countries for over two decades.  

Gas exported by Russia to Germany and other big western European economies via pipelines crossing Poland and Ukraine accounts for a significant share of all the power generated in Europe this winter.          

The price of wholesale gas for delivery in May and June jumped at one stage by 10% to €79.25 per megawatt per hour, based on the  Dutch TTF gas contracts that trade on London's ICE exchange.  

Crude oil also rose sharply. Brent crude jumped 2% to over $97.30 a barrel, having reached its highest since September 2014 at $99.50 earlier in the day. It takes about two weeks for changes in crude oil to be reflected at petrol forecourts. 

"The potential for a rally over $100 a barrel has received an enormous boost," said Tamas Varga of oil broker PVM. 

The Organisation of the Petroleum Exporting Countries, or Opec, and allies, together known as Opec+, have resisted calls to boost supply more rapidly.

Gerard Brady, chief economist at business group Ibec, said a very small number of Irish goods in agri-foods rely on sales to any significant extent on Russia, and that Ireland does import fertilisers from the country. 

However, the major fallout to business here from the crisis comes from higher gas and oil prices, as well as wheat prices, Mr Brady said.    

On US markets, wheat prices hit a three-month high and corn prices touched their highest since June, as investors feared that the crisis heightened risks of disruption to vital Black Sea grain flows. 

The wheat market has been particularly sensitive to developments in Moscow's standoff with the West over Ukraine, since Russia and Ukraine account for a significant portion of the world's export supplies.

A Russian export quota for the rest of the current season and Ukraine's official forecast of its expected exports suggested that 15m tonnes of wheat potentially remain to be shipped from the region before the next harvest, Commerzbank said. 

"Such a large amount could hardly be sourced elsewhere and would lead to a significant reduction of stocks in the other export countries," it said in a research note. 

However, wheat markets trimmed earlier gains as markets awaited confirmation of Western sanctions against Moscow and signs of disruption to shipping.

Ukraine is one of the world's largest corn exporters and a bumper harvest has given it more of a role this season while South American suppliers face drought. 

• Additional reporting Reuters