Oil & Gas Continue To Flow From Russia Via The Ukraine To Europe

With the vote in the Crimea showing that 96% of the voters favor returning to Russia the backlash between the West and Russia threaten global markets. President Obama today has threatened sanctions against Russia while the Eurozone is ready to implement a long list of embargoes and the freezing of assets. Crude oil which is one of Russia’s largest exports and flows through the Ukraine along with natural gas remains at recent lows. Crude oil is trading at 98.68 while Brent oil is flat at 108.30. Natural gas is trading at 4.508 up by 91 points.

To the surprise of most speculators gas and oil pipelines crossing Ukraine have operated normally since the incursion, according to officials from Gazprom and OAO Transneft, Russia’s oil-pipeline operator. Russian crude flows through Ukraine via the southern branch of the Druzhba pipeline, which carried about 300,000 barrels a day last year, according to data from Ukraine’s energy ministry. That’s a fraction of the 3.05 million barrels of crude and 1.02 million barrels of refined-oil products that Russia exported daily to Europe last year, data from the Paris-based International Energy Agency show.

The Ukrainian government, the EU and the U.S. consider the referendum illegal. The West is threatening sanctions against Russia if it doesn’t pull back. Russian troops entered the Kherson region on the Azov Sea from the Crimea peninsula they already occupy, the government in Kiev said March 15. An escalating conflict hasn’t been ruled out by investors yet. 

After tumbling off a recent high of 105 reached when Russia troops supposed invaded the Ukraine two weeks ago continued to ease but climbed as much as 0.5 percent in New York. The U.S. and the European Union warned Russia not to annex Crimea after the referendum, setting the stage for sanctions against the world’s biggest energy producer. Libya’s production fell after protesters closed a pipeline carrying crude from Sharara, the country’s second-largest field, according to state-run National Oil Corp. In Libya, crude output dropped to 230,000 barrels a day from 408,000 barrels a day after the disruption at Sharara, Mohamed Elharari, a spokesman at National Oil, said yesterday. Protesters are seeking jobs and development projects for the local community. Libya, a member of the Organization of Petroleum Exporting Countries, holds Africa’s biggest oil reserves. The nation pumped 350,000 barrels of oil a day last month, according to estimates.

Europe gets about 40% of its natural gas from Russia and there are few alternative sources today. A shortage of natural gas in Europe could be quite disruptive. Higher prices are a likely outcome even if supplies are not disrupted. US natural gas gained this morning but an increase in demand is limited as the US does not have enough export facilities in place to ship gas to offset global demands and shortages.