Strong points

Western politicians still warn of potential sanctions

Russia says some troops have withdrawn from Ukrainian border

German Chancellor meets Putin on February 15

Oil futures fell across the board on Feb. 15 amid signs that a diplomatic solution to the Ukraine crisis remains possible despite US and EU officials continuing to warn of possible sanctions .

As of 2:36 p.m. Singapore time (0636 GMT), the ICE April Brent futures contract was down 65 cents/bbl (0.67%) from the previous close at $95.83/bbl, while the NYMEX March Light Sweet Raw contract was 70 cents/bbl (0.73%) lower at $94.76/bbl. The fall followed crude prices closing near $100/bbl on February 14.

In recent weeks, Russia’s main crude oil grade, the Urals, has felt the brunt of possible sanctions, said Rebeka Foley, oil market analyst, Europe and FSU at S&P Global Platts Analytics.

“So far the differentials don’t appear to be responding to reports of easing tensions, but the current situation has certainly added to the volatility in crude markets,” Foley said.

US and European officials have repeatedly warned of further sanctions if Russia launches an invasion of Ukraine. Officials said the Nord Stream 2 pipeline could be the target of legislation, as well as financial sanctions, that could limit Russian companies’ access to U.S. dollar transactions and the SWIFT financial messaging system.

These restrictions could threaten Russia’s ability to supply raw materials to world markets.

On February 15, warnings of new sanctions continued. UK Foreign Secretary Liz Truss said new UK legislation had been drafted in recent days authorizing “much tougher sanctions targeting Russian oligarchs, banks and businesses – a range of sanctions involving freezing assets, financial instruments and visa bans,” she said.

Legislation published by the UK government includes the targeting of companies or individuals who benefit from or support public or strategically important companies, including in the energy, chemicals and transport sectors.

EU High Representative for Foreign Affairs and Security Policy Josep Borrell said that if Russia invades Ukraine, “Nord Stream 2 will not become operational – this is completely reasonable and clear. This does not mean, however, that Nord Stream 2 would stop working forever,” speaking to the Today program on BBC Radio 4.

Not only would NS2 be affected by conflict, Borrell said. “All gas supplies from Russia to Europe will be affected. We have to be prepared for that – all sanctions involve retaliation. We have to be prepared for that,” he said.

On February 15, German Chancellor Olaf Scholz meets Russian President Vladimir Putin in Moscow as negotiating efforts intensify.

Speaking ahead of the meeting, Putin reaffirmed that Russia has been a reliable energy supplier for decades, according to a statement posted on the Kremlin’s website.

“In all these decades there has not been a single interruption in the supply of energy resources to Russia, everything is done according to market principles, and there is absolutely no question or doubt here,” Putin said.

Lost streams

Platts Analytics currently forecasts the start of Nord Stream 2 in October 2022. It estimates that in this case it would contribute 68 million m3/d to the balance of North West Europe in the winter of 2022. It sees the impact of a suspension of NS2 on winter The balance for 2022 will only be 47 million m3/d, “because some of the lost flows are compensated by increased use of Nord Stream 1 and Yamal-Europe by compared to our base scenario,” he said in a spotlight published on February 14.

Existing sanctions against Russia introduced in response to its role in the Ukraine conflict in 2014 include a ban on the transfer of technology used in deepwater, shale and Arctic offshore oil production. Financial sanctions restrict Russia’s access to Western funding.

The impact of these measures on the operations of Western producers in Russia has been limited, but the latest tensions have increased the risks associated with involvement in the Russian energy sector.

On February 15, Glencore announced that it had agreed to sell its stake in Russian oil producer Russneft, after cooperating with the company since the early 2000s.

Meanwhile, Russia has started withdrawing some troops after the completion of planned military exercises, Russian Defense Ministry representative Major General Igor Konashenkov said on February 15, according to a statement posted on the Facebook page. of the ministry.

This followed a meeting between Russian Foreign Minister Sergei Lavrov and Russian President Vladimir Putin on February 14, during which Lavrov called for more time for diplomacy.

Outside Russia, politicians said there was a window for diplomacy, although many still saw an invasion as likely.