GS Caltex Samsung-ro gas station, Gangnam-gu, Seoul.  (Maekyung DB)

Russian-Ukraine gas pipeline disruption…

GS Caltex Samsung-ro gas station, Gangnam-gu, Seoul. (Maekyung DB)

Domestic LPG and refinery stocks closed higher as concerns over energy supply and demand arose in the aftermath of the shutdown of Ukraine’s gas pipeline.

On May 12, S-Oil (S-Oil) finished trading at 109,000 won, up 2.83% from the previous trading day, and SK Gas at 125,000 won, up 2.46%. GS and Daesung Industrial also rose 0.86% and 0.71%, respectively.

As the war between Russia and Ukraine prolongs, energy supply insecurity has risen to the surface again, and international oil prices have soared. The EU’s ban on imports of Russian crude oil is also boosting oil prices. When international oil prices rise, refiners have an advantage in their financial statements with inventory valuation gains, so stock prices tend to rise as well.

All three major crude oil prices were higher than $100 on the day. On May 11 (local time) on the New York Mercantile Exchange (NYMEX), the US West Texas Intermediate (WTI) futures for June delivery stood at $105.71 per barrel, up 6% from the previous trading day. North Sea Brent futures are $107.51 per barrel, and Dubai crude, the cheapest, is $104.56 per barrel.

According to Reuters, on May 10 (local time), Ukrainian gas transport company GTSOU decided to suspend gas transport from Russia. GTSOU said in a statement that the current situation was ‘force majeure’ and that it would suspend gas transportation through the Sokraniuka route from the 11th. It said that the Luhansk Novovskow gas compression facility could not be operated due to Russian interference. However, in order to comply with its shipping obligations to its European customers, it added that any undisclosed capacity in Novovskow will be temporarily transferred to the Sudza facility in Ukraine’s controlled area, he added.

Until now, Ukraine has consistently served as a major transit point for Russian gas to Europe despite the Russian invasion. Among them, the Luhansk Novovskow facility is the entry point for Russian gas in Ukraine, and it passes about 32.6 million cubic meters of gas per day. About a third of Russian gas that goes to Europe via Ukraine will suffer from supply shortages.

The prospect that the EU will reach an agreement on sanctions against Russian oil within a few days is also considered a factor in the rise in oil prices. The European Commission announced on the 4th that the 6th sanctions against Russia included a plan to phase out Russian crude oil within six months and petroleum products within the year. The EU considers the plan to be one of the measures to cut off the main funding lines for Russian President Vladimir Putin’s war in Ukraine. French Foreign Minister Clement Bonn said on the 10th (local time) that negotiations could be reached this week.

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