Natural gas proves to be more sensitive to geopolitical risks – ING

Oil prices have been somewhat insulated by the growing tension between Russia and Ukraine. However, natural gas prices have been more sensitive to these developments, while Gold, as one would expect, has benefitted from safe-haven demand, ING’s commodity analysts Warren Patterson and Ewa Manthey note.

Geopolitical risks build

“Oil prices edged lower yesterday despite growing geopolitical risks related to Russia and Ukraine. Having fired a US made missile into Russia earlier in the week, there are reports that Ukraine has now fired British made missiles into Russia. For oil, the risk is if Ukraine targets Russian energy infrastructure, while the other risk is uncertainty over how Russia responds to these attacks.”

“EIA weekly data yesterday showed that US commercial crude oil inventories increased by 545k barrels over the last week with stronger crude oil imports (+1.18m b/d WoW) almost offset by stronger crude exports (+938k b/d WoW). For refined products, gasoline stocks increased by 2.05m barrels, while distillate stocks fell by 114k barrels.”           

“European natural gas has been unable to escape the rising tension between Russia and Ukraine. TTF settled almost 2.5% higher yesterday on the back of this growing geopolitical risk, while the market is also keeping a close eye on Russian pipeline flows to Europe after Gazprom halted supplies to OMV. However, up until now Russian pipeline flows via Ukraine remain stable. Meanwhile, European gas storage has fallen below 90% and is also now just below the 5-year average of 91% for this time of year.”