đĽEU Gas Looks Long-Term
A mild winter was a lucky draw for a region losing its largest gas supplier, and EU officials arenât keen on relying on serendipity a second time.
This week, EU countries and Ukraine met to discuss joint-purchasing schemes to improve region-wide procurement, with the first contracts expected this summer.
The region doesnât want short-term, volatile deals, either. Itâs after energy security, and non-EU Norway has raised its hand to help the buyers find supply.
In the months following Russian-owned Gazpromâs departure from the Union, Norwayâs majority state-owned Equinor stepped in to become Europeâs leading supplier.
Equinor wants more and is willing to play ball if the EUâs joint purchasing scheme follows through with long-term deals.
After investing in production to meet the regionâs demand, the company wants assurance that the rug wonât be pulled from under its feet if the EU looks elsewhere for supplies.
In 2022, Equinor produced 1,589 bcf (45 bcm), or ~36%, of Norwayâs ~4,372 bcf (123.8 bcm) of natural gas.
đ˘ď¸Oilâs Regional Shifts
Sanctions against Russia over its efforts in Ukraine are inverting historical European-Asian price discrepancies.
Without the EU consuming Russian oil, Asia is enjoying newfound purchasing power, chipping away at the âAsian premiumâ the region used to pay to secure oil from big exporters like Russia and OPEC members.
Now, Asian buyers are securing exports like Russian Urals crude at discounts of $15-$20 per barrel, a figure that compounds quickly when refiners process hundreds of thousands of barrels daily.
Eroding the Asian premium isnât the only benefit for buyers, either. As discussed in last weekâs Energy Shots, western sanctions on Russia are eating away at the dollarâs historical dominance in international transactions. Asia is buying supplies at better prices and doing so in non-dollar currencies.
On the other hand, Europe’s crude is following a similar trend as its natural gas supplies. Norwayâs Equinor has stepped in with oil from the Johan Sverdrup field to fill most of the gap.
Whether the European-Asian inversion is lasting or fleeting largely depends on the resolution and aftermath of the Russia-Ukraine conflict.Â
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