The top currencies in Europe dropped in value to the Dollar. The Russian-backed gas firm halted gas distribution to Europe indefinitely, leading to an increase in gas rates.
Surge In Gas Rates
Gazprom, a gas firm that is backed by Russia, stopped sending gas to Europe by closing the Nord Stream 1 channel. They explained that they need to fix a leakage in the pipeline.
However, this might be a medium through which Russia wants to oppress Europe as a payback for the sanctions they suffered due to Ukraine’s attack.
Following the closing of the Russian gas channel, nations across Europe are in a rush to reserve as abundant gas as possible before the winter comes. They are also looking for an alternative source of gas.
Similarly, the cost of gas inflated on Monday as sellers are reserving gas because of the fear that Russia will completely stop delivering gas to Europe.
The UK gas supply contract for October inflated to 550p a therm. That’s about a 35% growth and near to 650p of August, the peak in 5 months.
Also, November and December contracts increased by 27% and 26% with 638p a therm and 720p a therm, respectively. Likewise, the Dutch TTF gas contract for next month also increased to €272 a megawatt hour. Which is a growth of 30%.
Fall In Euro And Pound
The likely fuel scarcity poses a danger of economic meltdown to nations that count on gas to run their industries, especially the UK. This in turn led investors to dump their currencies for dollars, weakening the Euro and Pound in the process.
On Monday, the euro dropped to $0.9879, the lowest since 2002. The Pound also dropped to $1.1444 against the Dollar. The worst since the Covid-19 period in 2020.
The stock charts in Europe show Germany’s Dax dropped by 3%, France’s Cac 40 dropped by 2% and there was just a 1.1% decline in London’s FTSE 100.
Kit Juckes and Lee Hardman who work for Sociéte Générale bank and MUFG respectively said in their comments that Putin weaponizing the energy supply is because European countries are against Ukraine’s invasion and this will adversely affect their economies and the euro.
Increase In Oil Rates
Reuters’ report states that the OPEC and big oil nations, of which Russia is inclusive, will discuss the possibility of decreasing oil supply by 100,000 barrels daily. This has led to a rise in oil prices.
Brent crude oil gained 2.7% as it moved to $95.5 for a barrel. The WTI, the benchmark for North America, also jumped to $89 per barrel, a 2.5% increase.
Although the G7 nations decided to put a price ceiling on Russian oil to lessen funds entering Russia. It is unknown if this will reduce the rates of gas or not.