Gas-producers: We will not be able to provide crucial replacement gas if sanctions against Russia affect Europe.
Tensions in Ukraine increased sharply, last night when finally Mr. Putin signed the last week's Duma's passed law to announce the Donetsk and Luhansk as "independent" countries. The decision was also supported by a group of Russian officials. It is against the Minsk II agreement.
As a reaction, some European countries announced a few sanctions and announced that this list going to be much longer but in a short period. Among them, the White House said it would issue an executive order prohibiting people from investing, trading, and financing activities in the Donbas region.
This news and reports made Crude Oil, and European natural gas prices soar, especially after the news of Russian troops entering eastern Ukraine, to the countries as newly-formed republics.
Russia's actions against Ukraine, which would be against western countries as well, could threaten Russian gas supplies to Europe while remaining that about a third of this export typically travel through pipelines crossing Ukraine. In the long term, it can prompt Western European countries to seek alternative energy sources, however, in the short term, they do not have many options to choose from.
Therefore, while the US and its European allies would like to impose sanctions on Russia, the curbs to Moscow’s ability in trading with foreign currency, possible disruption on energy markets can make them think twice before any action.
On the other hand, these days we have two days Gas Exporting Countries Forum (GECF) summit in Qatar that started yesterday, and Russia also took a part there. Russian representatives told that they are doing their best to keep the market stable by adhering to all short-term and long-term commitments. It must be important for the energy buyers around the globe, especially after that gas-producing nations told, that they will not be able to provide crucial replacement gas if sanctions against Russia affect Europe.
While fundamentally still bulls have enough reason to stay there or even continue the rally, technical indicators also clearly remain bullish, especially above $88.
