Russia and Ukraine have reached an agreement which ends a bitter dispute over natural gas prices and guarantees supplies to Ukraine as well as to the lucrative European market.
After talks in Moscow, officials from Russian energy giant Gazprom and its Ukrainian counterpart Naftogaz said they had agreed on a five-year deal under which Ukraine will buy gas at a rate of $95 per 1,000 cubic metres.
Oil fell towards $62 today after Russia and Ukraine settled the natural gas dispute which had caused a $2 jump in oil prices yesterday.
At lunchtime US light crude was trading down 76 cents to $62.38 a barrel. London Brent crude traded at $60.50, down 85 cents.
The deal settles a dispute that saw deliveries to Ukraine cut off on Sunday, a move which had the knock-on effect of reducing supplies to the key European market which relies on Russia for a quarter of its gas needs. European Union energy commissioner Andris Piebalgs welcomed the deal.
Gazprom controls a third of all global natural gas reserves, and the vast majority of deliveries to Europe - where Germany is the biggest importer - pass through Ukraine.
Under today's agreement, which is open to re-negotiation later in the five-year period, Ukraine's gas supplies will come from Russia and Gazprom's partners in Central Asia: Kazakhstan, Turkmenistan and Uzbekistan.
The Russian gas will be supplied to a joint venture, RosUkrEnergo, at $230, and the gas from Central Asia at a much cheaper rate. Ukraine will have the right to buy gas from the joint venture for its own needs for $95, Naftogaz said. For Ukraine, that is nearly double last year's tariff of $50. The two sides also agreed to raise by 47% the amount Ukraine is paid for the transit of Russian gas to Europe.
