Meeting of China and Russia
After a meeting between Vladimir Putin and his Chinese counterpart Xi Jinping, Russia struck a huge gas supply contract with China on Feb. 4 as geopolitical tensions with the US over Ukraine continue to affect commodity prices.
S&P Global Platts
S&P Global Platts Analytics have strained Russian-U.S. relations recently, according to a new report because of fears that Moscow is planning an invasion of Ukraine.
Rosneft
According to Rosneft, Russia’s Rosneft and China’s CNPC have agreed to supply 100 million mt of crude oil, or 200,821 b/d, via Kazakhstan.
On the European trading day of February 4. The ICE April Brent crude futures contract reached a new seven-year high of around $93/b.
Trade
In the last few years, Russian gas delivery through Ukraine has declined and will end at the start of 2022.
Even in the year 2021, almost 9% of Europe’s gas consumption will be met by transiting through Ukraine.
Five Year Transit Plan
In 2019, Gazprom and Ukraine’s Naftogaz agreed to a five-year transit arrangement under ship-or-pay terms for the Russian corporation to transmit at least 110 million cu m/d of gas via Ukraine to Europe in 2022, meaning it must pay for that level of the transit whether it uses the route or not.
Since the beginning of February, deliveries via Ukraine have rebounded, with flows at the crucial Velke Kapusany entry point considerably above the January lows of just 25 million cu m/d.
As a key conduit for oil supplies to Eastern Europe and the EU’s periphery, Ukraine is a major player.
Down Fall of Russian Crude Oil
In Slovakia, Hu, and Ukraine, Ukraine’s oil from Russia is shipped. There was a decrease in the amount of Russian crude export to the European Union in 2021, but the amount of oil exported to Belarus remained stable at around 800,000 barrels per day.
5.2 million mt, or 104,427 b/d, of oil, was shipped to Slovakia last year; 3.4 million mt, or 68,279 b/d of crude was shipped to Hungary, and 3.4 million mt of crude was shipped to the Czech Republic via the southern arm of the Druzhba pipeline network.
Ukraine is the fourth-biggest exporter of maize in the world and the largest in Europe, accounting for around 13% of worldwide corn exports. The European Union accounts for half of the country’s exports, although China is also a big importer.
Exports of wheat to China have grown by 27% in the marketing year 2021-22 (from July to the end of June) to 16.1 million metric tonnes, largely due to an increase in export tariffs in Russia’s neighbour.
By 2021-22, S&P Global Platts Analytics predicted that Ukraine would export 22.5 million metric tonnes of wheat. •
It also ranks 13th in steel production and 5th in iron ore exports by volume around the globe.
| In 2021, Ukraine produced 21.4 million metric tonnes of crude steel. • It exports over 80% of its steel production.
Metallurgical coal and coke imports totalled 9.85 million metric tonnes in 2021, compared to 44.4 million metric tonnes of exports. More than 3 million tonnes of steel scrap collect and ship.
Prices
Oil prices first touched seven-year highs in mid-January, propelled by a rebound in transportation. Concerns about spare capacity among key producing nations delayed progress in lifting Iran’s sanctions and tensions over Ukraine. Before increasing further in intraday trade on February 4.
Since mid-December, the price of Russia’s Urals oil, which ships through Ukraine, has risen as a result of rising geopolitical risk. And more optimistic crude demand estimates. When Urals crude was value at $88.62/b on February 3. It was up from $68.35/b just two weeks earlier, according to Platts.
After a sharp drop at the start of 2013. European gas prices began to rise again in mid-January, partly due to growing concerns about a Russian-Ukrainian war.
A record Eur182.77/MWh is set on Dec. 21 for the benchmark European gas contract TTF DA, which then dropped to Eur61.28/MWh by year’s end. The contract was trading at Eur79.65/MWh at market close on February 3, up 330 per cent year-on-year, according to Platts data.
Gas supply conflicts could have an impact on power, carbon, and coal pricing in Europe. Since the beginning of the year, CIF ARA spot coal prices have grown by 27%, according to Platts, to reach $150.95/mt on February 3. Over a year, the value of the substance has increased by 122 per cent.
EU Emissions Trading System prices hit a new record of Eur94.62/mtCO2e on the ICE Index platform. In part because of the persistent uncertainty regarding European gas reserves.
Due to increased global demand for Ukrainian corn and Russian threats to impose export taxes on grains, prices for the crop have risen.
May 2021 saw a seven-year high in Ukraine FOB Black Sea grain export prices of $301 per metric tonne. As of Feb. 3, prices had climbed to $282/mt from $254/mt in September, and have continued to grow subsequently.
Infrastructure
When it comes to transporting raw resources from Mariupol. The Kerch Strait provides a vital link between the Black Sea and the Azov Sea.
In addition to serving as transhipment ports for deep-water boats. Russia’s Azov and Rostov ports also act as loading stations for small parcel shipments of wheat, barley. And grain to eastern Mediterranean destinations. Read more.
There are several Ukrainian seaports where wheat and corn export, including the southwestern Panamax-capable ports of Odesa, Pivdennyi, and Chornomorsk. They are, however, all near the Russian-occupied Crimean peninsula.
Markets depend on the safe passage of Druzhba pipelines and ports.
Druzhba pipeline’s southern portion transports Russian oil to Slovakia, Hungary, and the Czech Republic.
Ukrainian pig iron and steel as well as steelmaking raw materials such as coking coal transport through Mariupol, Ukraine’s principal port on the Sea of Azov. About one-quarter of Ukraine’s overall exports in value have come from Mariupol in recent years.
For Ukrainian mining and steel company Metinvest and other bulk shipping on the route. Any restriction of vessels passing through the Kerch Strait might have a significant impact on supply routes.
Ukraine’s political situation could have a significant impact on the future of the Nord Stream 2 gas pipeline. Read more about the Russian and Ukraine conflict.
In a vote on January 13, the US Senate rejected a bill that would have overruled the Biden administration’s agreement with Germany on Nord Stream 2 sanctions.
According to Kremlin spokesperson Dmitry Peskov, European gas users are “worse off” with the Nord Stream 2 pipeline shut down while prices remain at record levels. S&P Global Platts Analytics has pushed back the start-up date of NS2 to October 2022 from the previous base-case scenario.
