Oil Prices Tick Higher After Putin Threatens to Let Europe ‘Freeze’

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Oil prices inched up on Thursday after Russian President Vladimir Putin hinted that he might tear up supply contracts to let Europe freeze this winter.

Brent crude, the international benchmark, traded up 0.5% at $88.45 a barrel. West Texas Intermediate, the U.S. standard, rose 0.6% to $82.42 after slipping to the lowest since January on Wednesday.

Crude prices remain below where they were before Russia invaded Ukraine in February. They initially spiked after the invasion on concerns that Russia, one of the world’s biggest exporters, wouldn’t be able to sell as much oil as Western nations vowed to wean themselves off it. The supply, however, made it into international markets through Asian countries such as India and China.

The ample supply of oil, combined with the outlook for a weakening global economy that is expected to damp energy demand, are what is behind the recent decline in crude prices.

It’s been a different story for natural gas. Gas supply lines are harder to change because they rely more on pipelines. Russia has indefinitely closed the Nord Stream pipeline into Europe. Gas prices on the continent have stayed high, threatening to create a crisis when the fuel is needed to heat homes in winter.

Speaking at a conference Wednesday, Putin suggested he might cut off all energy being sent to Europe—the continent is still receiving some gas through a pipeline that runs through Ukraine—with European Union leaders trying to enact a price cap on Russian oil exports.

“We will not supply anything at all if it contradicts our interests,” Putin was quoted as saying at an economic forum in Russia’s far east. “We will not supply gas, oil, coal, heating oil — we will not supply anything.”

European energy ministers will be meeting Friday to discuss how to help households and businesses get through the winter. Possible measures include price caps and subsidies, paid for by windfall taxes on companies that have profited from the price spikes.

Analysts at Gavekal Research wrote this week that the winter might be manageable after European countries did a good job of stockpiling gas before it was cut off. Europe will almost certainly have to significantly reduce energy consumption to avoid running out of fuel.

In Putin’s speech, he went on to cite a Russian fairy tale in which a fox tricks a wolf into letting his tail be frozen as they tried to catch fish. “We would let the wolf’s tail freeze,” he said.

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