However, last week, Barron’s reported that Russia’s state-run energy company, Gazprom (OGZPY), cut supplies to Poland — which has been openly critical of Russia’s actions in Ukraine — by about 20%.
Since then, Poland stopped flows to the Ukraine for two days. And Slovakia also reported a decrease in gas supplies received from Russia.
Some energy analysts say this move was a clear warning signal from Russia that it is willing to retaliate against the EU’s current round of sanctions.
With Brussels considering new sanctions over Ukraine, it’s possible Moscow might turn off the energy spigot once again.
Here are some of the potential victims … and victors.
Who Might Russia Cut Off Next?
According to reports, Gazprom can attribute almost 54% of its natural gas sales to Poland, and it supplies roughly a third of the European Union’s demand.
This past summer, before the European Union instituted its sanctions, I wrote that “Europe Just Can’t Afford to Punish Putin” because of its dependence on Russian energy exports.
In that article, I said tough energy sanctions would likely hurt Russia the most. Yet, that may not be enough to stop the country from sending another msessage to its customers.
This past weekend, the WSJ published the graph below where some countries have natural gas storage capacities that are concerning (i.e. Ukraine, Hungary, Bulgaria and Latvia).
Note that each of these countries (ex-Ukraine) are members of the European Union.
If Russia were to cut more supplies, this could give a lift to natural gas prices and companies that have high natural gas to oil reserves.
Could Putin Push Natural Gas Prices Higher?
Natural gas companies could benefit from Russia’s attempt to use its energy as leverage to pursue their ambitions to expand.
Also, natural gas usually gets a lift during winter. Take note of this five-year chart for natural gas:
In most years, natural gas prices are higher in March than December.
The one exception in this time frame came in 2012, when natural gas prices collapsed because of the shale natural gas revolution.
Natural gas prices have been consolidating since August.
However (and here’s the opportunity) …
Most natural gas companies have reduced their natural gas production by changing their capital spending and efforts into developing natural gas liquids (NGLs) and oil.
As companies cut back on their natural gas capital spending and efforts, natural gas prices were able to recover.
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