Will Russian reaction to Ukraine open European energy opportunity

Going For the Gold

Russia may have won the most metals in the Olympics but is losing the battle in influencing the future of the Ukraine. Geopolitical factors are heating up around the globe and so is the petroleum complex and precious metals. Ukraine, Libya, Venezuela and the south Sudan are all hotspots with the most dramatic events taking place in the Ukraine. 

Ukraine’s President Viktor Yanukovych seen as a puppet for Russia and the minority in the East part of the country has fled the country as Ukraine's acting government issued a warrant for his arrest. The EU and the United States  is trying to lend financial support without upsetting the Russians that still have a stranglehold over Europe when in comes to natural gas supply.  Russia supplies 31% of EU gas imports, 27% of crude oil imports, 24% of EU coal imports, 30% of total EU uranium imports, and is the EU’s third-largest supplier on energy over all. The G20- has offered support and even asked Russia to join the bailout in hopes that Russia does not intervene in the situation.

Russia has already pulled financial aid from the country and has also threatened to raise natural gas prices. A showdown could lead to Russia pulling the plug on natural gas supply which they have done in the past. The threat and uncertainty surrounding the Ukraine has Europe slowing exports of oil and products as they fear they may need them if they have to use them to offset the loss of Russian gas.

If that was not enough, in Libya oil production has fallen to 230,000 barrels a day from 570,000 bpd due to the closure of the el-Sharara field following protests, state-owned National Oil Corp (NOC) said.

As reported by Bloomberg "The country's oil production has fallen to 230,000 bpd after the closure on Thursday evening of the oilfield at el-Sharara," which has an output of 330,000 bpd, NOC spokesman Mohamed al-Harairi said on Sunday. Harairi added that the field had to shut down because "protest movements near the... wells no longer ensure the optimal security conditions," without giving further details. It was repeatedly shut down by protesters as a way to pressure the weak central government into political and financial demands.

U.S. Gasoline futures are on the rise and the situation in Venezuela may be making it go higher. The Lundberg Survey reported that the average price for regular gasoline at U.S. pumps rose 11.67¢ in the past two weeks to $3.4111 a gallon.

This comes as refining maintenance and protests against the government in Venezuela heat up. President Nicolás Maduro is losing control of the socialist revolution as its economy is in a shambles. As his predecessor Hugo Chavez squandered what should have been a boom time for the country because of high oil prices instead became a piggy bank to fund his socialist agenda. The United States looks to Venezuela to supply gas components but not as much as we have in the past.  Bloomberg reports that Venezuelan oil sales are approaching 28-year lows as the country turns to China amid a shale boom that’s flooding U.S. refineries. Now a Canada-U.S. pipeline threatens to further curb its Gulf of Mexico access.

 

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