War in Ukraine: Russia says it may cut gas supplies if oil ban goes ahead

The energy markets have been supremely volatile over the past week, and understandably so. There are genuine fears that supplies of oil and gas from Russia could be cut off or disrupted.

Yet the response to Russia’s suggestion it could close a major pipeline, depriving northern Europe of a large chunk of its gas supplies, has been pretty muted so far.

There are a couple of reasons for this. Firstly, Russia is threatening a tit-for-tat embargo – cutting off its gas exports if the West goes ahead with a ban on Russian oil.

But despite pressure from the US, such a ban is unlikely. European leaders have already poured cold water on the idea – so Russia’s counter-threat carries relatively little weight.

And then there’s the fact that Russia is still making huge sums from sales of oil and gas to Europe every day, helping to fund its war.

Moscow has everything to gain from exploiting traders’ nerves to push up energy prices; but a great deal to lose if it were to carry out its threat.

Ukraine has implored the West to adopt an oil and gas ban, but there are concerns it would send prices soaring. Investor fears of an embargo drove Brent crude oil to $139 (£106) a barrel at one point on Monday – its highest level for almost 14 years.

Rises in Brent crude were muted on Tuesday, with the price of a barrel 3% higher at $121.

Meanwhile, wholesale gas prices rose to 565p per therm after starting the day at 501p

UK stock markets rose slightly in early trading after a volatile Monday caused by the US’s discussions over a potential Russian oil and gas ban.

Early on Tuesday, nickel prices on the London Metal Exchange more than doubled to rise above the $100,000-a-tonne level for the first time, before trading in the metal was suspended.

Russia supplies the world with about 10% of its nickel needs, mainly for use in stainless steel and electric vehicle batteries.

Quoting unnamed sources, Reuters news agency reported that the US might be willing to move ahead with an embargo without its allies, although it only gets about 3% of its oil from Russia.

However, German Chancellor Olaf Scholz has dismissed the idea of a wider ban, saying Europe had “deliberately exempted” Russian energy from sanctions because its supply could not be secured “any other way” at the moment.

European powers have, however, committed to move away from Russian hydrocarbons over time, while some Western companies have boycotted Russian shipments or pledged to sell their stakes in Russian energy companies.

Mr Novak said that Russian companies were already feeling the pressure of US and European moves to lower the dependence on Russian energy, despite fulfilling all its contractual obligations to deliver oil and gas to Europe.

“We are concerned by the discussion and statements we are seeing regarding a possible embargo on Russian oil and petrochemicals, on phasing them out,” he said.