Till 15th March, Natural gas and Crude Oil prices were lower or stable compared to the start of the year. But in the past week or so the constant attacks that Ukraine is on Russian oil refineries and Russia is on Ukrainian power infrastructure are laying the foundation for volatility and a rise in prices over the next few months.
The Ukrainian attack has resulted in refinery levels dropping by 10% and in line with this Russia has now planned to reduce 470,000 bbl/day by June. This would result in total production at 9 million bbl/day in line with OPEC +. Even the impact of recent sanctions on tankers has resulted in lower offtake.
On the flip side, the attacks by Russia on Ukraine's power infra have resulted in the largest group loose 50% of generation capacity. This has resulted in Ukraine importing 14,900 Mwh with now export as compared to 3300 Mwh import and export of 2148 Mwh per day.
These actions might result in an escalation of prices sooner rather than later. Another risk to these prices will be any escalation of the Israel-Hamas conflict as in the last 24 hours ceasefire hopes have reduced.
The most important impact would be on the inflation in coming months which might force central banks to delay rate cuts due to uncertainty ahead.
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