Oil is going up again after Russia cut natural gas supplies to Poland and Bulgaria, escalating the energy crisis.
West Texas Intermediate traded above $102 a barrel after going up another 3.2% Tuesday. Add to that, European gas prices surged as much as 24% Wednesday after Russia halted flows to Poland and Bulgaria. Putin made good on a threat to stop supply to countries that refuse his demand to pay for the fuel in rubles, not Euro or U.S. Dollars.
Adding fuel to the fire of energy and electricity energy prices going up, Germany said a full embargo on Russian oil would be manageable, potentially laying the groundwork for a continent-wide ban that may upend global crude trade. The U.S. and U.K. have already pledged to ban imports from the OPEC+ producer too.
Electricity Prices Will Go Up
The renewed geopolitical risk to electricity prices has come as the tightest corner of the oil sector flared up again. U.S. diesel futures settled at a record Tuesday, while profits from making the fuel in Europe are the highest since 2011. Russia is Europe’s largest external supplier of the middle distillate. Russia’s latest actions provide an alarming glimpse of things to come for other EU members and has put energy security concerns front and center of the political agenda.
In Asia, there are some signs emerging from China that Shanghai may ease lockdown measures as infections dropped to the lowest in three weeks while case numbers in Beijing stabilized. President Xi Jinping also made a commitment to boost infrastructure construction to bolster the economy.
The API (American Petroleum Institute) reported that U.S. crude stockpiles rose by 4.78 million barrels last week. This may help ease some of the pain on electricity prices, but it may end up being negligible in the long run if Russia continues to antagonize the world.