"Unprecedented natural-gas reserves in Europe, record global grain output and the threat of mutual economic calamity from oil sanctions are cushioning commodity prices even as the Ukraine-Russia conflict spurs a gold rally".
"While U.K. gas prices, a European benchmark, rose 5.1 percent since the crisis began at the end of February, they are still the lowest for this time of year since 2010. Brent crude fell 0.5 percent. After wheat advanced 14 percent and corn 4.9 percent, both are still at least 26 percent below the peaks in 2010, the last time Russia and Ukraine curbed shipments. Gold reached a six-month high on March 14 as demand for a haven grew".
"Abundant supply is limiting some price swings caused by Russia’s incursion into Crimea, where a majority in a disputed vote March 16 chose to join Russia, exit polls showed. Europe gets about a third of its gas from Russia, half of it through Ukraine, and about the same proportion of crude. Russia’s economy has slowed for three consecutive years, increasing its reliance on the export revenue. Sanction talks in Europe have focused on asset freezes and visa bans rather than energy.
“This is basically a hydrocarbon version of Mutually Assured Destruction,” said Seth Kleinman, Citigroup Inc.’s London-based head of energy research. “Europe needs Russian energy, and Russia needs Europe’s money.”
Supplies of Russian gas transiting through Ukraine into Europe were interrupted in 2006 and 2009 because of disputes over prices and terms of supply. On both occasions, temperatures were freezing. Europe is now having its mildest winter since 2007, and stockpiles were about 45 percent full on March 13, up from 34 percent a year earlier, according to Gas Infrastructure Europe, the Brussels-based lobby group".
Source: Bloomberg TV
