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Russian Oil Seen Heading East Not West in Crimea Spat

The Crimean crisis is poised to reshape the politics of oil by accelerating Russia ’s drive to send more barrels to China , leaving Europe with pricier imports and boosting U.S. dependence on fuel from the Middle East. China already has agreed to buy more than $350 billion of Russian crude in coming years from the government of President Vladimir Putin . The ties are likely to deepen as the U.S. and Europe levy sanctions against Russia as punishment for the invasion of Ukraine. Such shifts will be hard to overcome. Europe, which gets about 30 percent of its natural gas from Russia, has few viable immediate alternatives. The U.S., even after the shale boom, must import 40 percent of its crude oil , 10.6 million barrels a day that leaves the country vulnerable to global markets. The alternatives to Russia also carry significant financial, environmental and geological challenges. […]

Posted On : Published By : Tom Whipple
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Funds cut Russian holdings after sanctions

Days after Washington imposed sanctions against an additional 20 Russian individuals and a top-20 Russian bank , investors are still reeling from the news and beginning to wonder what the long-term consequences of the heightened geopolitical conflict will be for Russia Inc. Unlike the US’s first group of sanction targets, who were Russian officials with little to no business holdings, the second group includes businessmen who own shares in some of the biggest Russian stocks, many of which are traded in London and New York and sold to US and UK institutional investors. While the sanctions are only meant to target assets which the individuals have control over, many funds are now pondering whether they can justify holding on to stocks, which count such individuals as their minority shareholders. A portfolio manager at a UK asset management group says his fund is “staying clear of any company involved with […]

Posted On : Published By : Tom Whipple
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Kiev Blamed for Blackout in Capital of Crimea

A power failure plunged much of the Crimean capital, Simferopol, into darkness on Monday, the second partial blackout in two days, as the Ukrainian government in Kiev appeared to retaliate against Russia’s occupation and annexation of the peninsula by sharply cutting electricity supplied from the mainland. Homes and businesses went dark across a large swath of the city, underscoring the vulnerability of the geographically isolated peninsula, which is dependent on mainland Ukraine for many vital services, including electricity and much of its water supply. Officials here and in Moscow had anticipated such a move by the Ukrainian government. In recent days, regional officials said they had acquired 900 generators to provide electricity to vital buildings, including hospitals. It was not immediately clear if those generators were in use. The state-run Ukrainian national energy company, Ukrenergo, issued a statement attributing the blackouts in Crimea to emergency repairs […]

Posted On : Published By : Tom Whipple
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Russia Is Slowly Turning The NatGas Tap Off To Europe

While Naftogaz (Ukraine’s gas pipeline operator) states that all gas transportation from Russia to Europe is running normally, Bloomberg reports that Russian natgas exports to Europe are declining. Shipments are down over 4% from the prior week and also lower to Ukraine . This ‘adjustment’ follows increased sanctions by the West as Medvedev’s notable statement this morning that Ukraine owes Russia $16bn. NatGas output is tumbling The good news: Gazprom today said natgas transit to Europe via Ukraine, supplies for Ukrainian consumption   But Pay Up… Ukraine owes Russia $11b after collapse of 2010 deal, Russian Prime Minsiter Dmitry Medvedev says to President Vladimir Putin at Security Council meeting, according to transcript on Kremlin website.   Medvedev adds $3b Ukraine bonds bought in Dec., ~$2b debt to Gazprom for natgas supplies   NOTE: In 2010, Russia agreed to sell natgas at discount in exchange for extending lease to Black […]

Posted On : Published By : Tom Whipple
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U.S. could start energy war with Russia

Debate has raged over whether the United States can fight Vladimir Putin on the Russian president’s most favourable ground: energy politics. It can, and it should, particularly because there’s an obvious path forward that coincides with American — indeed, world — economic interests. That path is lifting irrational restrictions on exports and making it easier to build natural gas export terminals. For years, Putin has used his nation’s wealth of oil and natural gas as a cudgel to bully his neighbours. At present, the European Union’s large imports of Russian natural gas discourage a forceful Western response to Russia’s aggressive actions in Ukraine. Meanwhile, the United States is tapping massive reserves of unconventional natural gas. […]

Posted On : Published By : Tom Whipple
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British foreign secretary calls for renewed focus on energy security

British Foreign Secretary said it was time for European leaders to get serious about energy diversity in response to the crisis over Ukraine. "We would need to boost investment in gas interconnections and terminals in Europe, and develop indigenous European energy supplies for countries wishing to develop their own resources, such as shale gas," he wrote in the Sunday Telegraph. European energy consumers get about a quarter of their gas needs met by Russia, though the bulk of that runs through the Soviet-era gas transit network in Ukraine. The turmoil that erupted in November has sparked concerns about the security of European energy supplies. Hague said renewed focus should be on the so-called Southern Corridor, a series of transit networks that would rely in part on gas supplies from Azerbaijan. Envisioned before the most recent crisis, the Southern Corridor is meant to break the Russian grip on the regional […]

Posted On : Published By : Tom Whipple
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London sees energy security through shale

British Energy Secretary Michael Fallon said the British economy needs to rely more on domestic energy reserves like shale gas for national security’s sake. "We have to develop more home grown energy like shale," Fallon said in an interview with the Sunday Telegraph. The British Geological Survey in June estimated the Bowland shale formation in the north of the country contains 1.3 quadrillion cubic feet of natural gas. The government says shale could ensure energy security for a country where net natural gas imports are on pace to increase from 45 percent of demand in 2011 to 76 percent by 2030. Protesters last year staged several demonstrations to protest shale operations. The practice is seen as a threat to the environment. The newspaper reported the British economy has relied on imported natural gas since output from the North Sea began its decline in 2005. Fallon said Russia’s grip on […]

Posted On : Published By : Tom Whipple
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Oil Futures Slip Further, WTI Trades Under $100/Bbl

rude-oil futures fell in Asian trading hours Monday as data showing weak manufacturing activity in China and lower demand with easing of a severe U.S winter weighed on trading sentiment. On the New York Mercantile Exchange, light, sweet crude futures for delivery in May traded at $99.10 per barrel at 0456 GMT, down 25 cents. May Brent crude on London’s ICE Futures exchange fell 27 cents to $106.65 a barrel. China’s preliminary HSBC Purchasing Managers’ Index was below 50–indicating a contraction in manufacturing–for the third straight month, slipping below expectations for a slight improvement after the effects of the Lunar New Year holiday over the first two months of the year. "This is obviously not supportive for markets," said Yusuke Seta, a commodities broker at Newedge Japan. He added that the U.S crude oil demand has softened with the easing of severe winter conditions. "Demand […]

Posted On : Published By : Tom Whipple
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Brent Slips for 1st Day in 3 After China Data; WTI Holds

Brent crude dropped for the first time in three days in London after a gauge of factory output in China contracted for a third month. WTI was steady. The European benchmark grade slid as much as 0.4 percent in London. A preliminary China purchasing managers’ index for March from HSBC Holdings Plc and Markit Economics dropped to 48.1, lower than the 48.7 median estimate of analysts surveyed by Bloomberg News . Brent and WTI rose March 21 after Russia completed its annexation of Crimea from Ukraine. “It has been clear for twelve months that manufacturing has been slowing in China,” Guy Wolf, global head of market analytics at Marex Spectron Group in London , said by e-mail. “Deflating a credit bubble is extremely hard to achieve in a measured way. The risks remain that it accelerates to the downside.” Brent for May settlement declined as much as 47 cents […]

Posted On : Published By : Tom Whipple