IEA Monitoring Russia Actions

The IEA noted this week that it is monitoring, with growing concern, Russia’s recent statements and actions, and their potential implications for energy markets.

“The agency is continuing its consultations with its member countries and key partners on appropriate measures to ensure energy security,” the IEA said in a statement posted on its website prior to Russia’s latest escalation in a conflict with Ukraine.

“While the specific impact on world oil markets is yet to be determined, IEA member countries stand ready to act collectively to ensure that global oil markets are adequately supplied,” the IEA added in the statement.

According to the IEA, most immediately at risk are the roughly 250,000 barrels per day of Russian oil exports transiting Ukraine via the southern branch of the Druzhba pipeline to supply Hungary, Slovakia and the Czech Republic.

“These countries have ample government held emergency stocks to draw upon in case of need. The IEA will continue to monitor the market closely and assess the need for activating its emergency oil system,” the IEA stated.

The IEA also noted that it is closely monitoring the developments in natural gas markets and said it will continue its consultations with member countries, association countries and key producing countries to facilitate market stability.

Total oil stocks in IEA member countries amounted to close to 4.16 billion barrels as of end-December 2021, of which 1.5 billion barrels are held by governments as emergency reserves, according to the IEA. IEA net-oil-importing countries are said to have an obligation to hold emergency oil stocks equivalent to at least 90 days of their net oil imports.

Earlier this week in a White House speech regarding Russian actions in Ukraine, U.S. President Joe Biden said the U.S. was closely monitoring energy supplies for any disruption. 

“We’re executing a plan in coordination with major oil-producing consumers and producers toward a collective investment to secure stability and global energy supplies,” Biden said in the speech.

Nord Stream 2 Impact

In a statement posted on his Twitter page on February 22, Olaf Scholz, the Federal Chancellor of the Federal Republic of Germany, announced that, under the present circumstances, certification for the Nord Stream 2 project was not possible.

There has been a dramatic change in the situation, and we must now reassess; this will include #NordStream2. I have asked our Economic Affairs Ministry to conduct a new analysis of the security of the energy supply. Under the present circumstances, certification is not possible.

— Bundeskanzler Olaf Scholz (@Bundeskanzler) February 22, 2022

In reaction to the decision, Dmitry Medvedev, the Deputy Chair of the Security Council of the Russian Federation, tweeted “welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!”

German Chancellor Olaf Scholz has issued an order to halt the process of certifying the Nord Stream 2 gas pipeline. Well. Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!

— Dmitry Medvedev (@MedvedevRussiaE) February 22, 2022

In a press statement on recent Russian actions, the president of the European Commission, Ursula von der Leyen, said, “Russia is not respecting its international obligations and it is violating core principles of international law”. 

“On Nord Stream 2, I think the German government is absolutely right. Nord Stream 2 has to be assessed in light of the security of energy supply for the whole of Europe,” von der Leyen added in the statement.

“Because this crisis shows that Europe is still too dependent on Russian gas. We have to diversify our suppliers and massively invest in renewables. This is a strategic investment in our energy independence,” von der Leyen continued.

Oil Spike

Oil spiked following a televised address by Russian President Vladimir Putin, which revealed the Russian leader’s next move regarding Ukraine. Following the address, the price of Brent Crude oil and West Texas intermediate shot up by several percentage points, as did the price of natural gas. The price of Brent and WTI shot up even further on Thursday as Russian forces further escalated a conflict with Ukraine.

At the time of writing, Brent was trading at $105.10 per barrel and WTI was trading at $99.84 per barrel. Natural gas was trading at $4.91.

On Wednesday, Walid Koudmani, the chief market analyst at financial brokerage XTB, highlighted that there was every chance we could see Brent oil prices above $100 soon, depending on Russia’s response to economic sanctions.

To contact the author, email andreas.exarheas@rigzone.com