Energy prices fall back to earth as Russian sanctions make room for exports

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It's been a volatile day in energy markets, as oil futures traded up ~9% before falling almost 7% into the close. Despite rumors in Europe, formally announced sanctions from the West largely avoided any impediments to Russian energy exports. Expulsion from the SWIFT payments system was also avoided, though Biden left the door open for further sanctions down the line.

SWIFT is a Belgian financial messaging system that links more than 11,000 financial institutions. Though several banks were sanctioned by the US, UK, Canada and others, the ability for Russian commodity producers to access the system helps ensure a smooth flow of exports out of Russia.

Germany and Italy have been very vocal about not creating any impediment to Russian gas and oil flows, with German Chancellor Olaf Scholz warning Boris Johnson that Germany would not support kicking Russia out of the SWIFT system. Germany in particular has accelerated its reliance on Russian gas, after prematurely closing half of the Country's nuclear power fleet in January of this year.

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With sanctions unlikely to impact energy flows, and with Russia yet to formally threaten the West with reduced supplies, supply / demand balances for oil remain largely unchanged. However, with Europeans scrambling to build power generation feedstock inventories, coal and natural gas prices remain elevated. Something that is sure to strengthen Moscow's trade balance as they finance their invasion of Ukraine.