The energy market implications of a Ukraine-Russia ceasefire could be huge for natural gas.. That’s what Rystad Energy’s Head of Geopolitical Analysis, Jorge Leon, said in a breaking news market update sent to the oil trading desks on Wednesday by the Rystad team. Leon highlighted in the update, however, that it is “still early in the process”.
“As early market reactions to yesterday’s news have shown, the geopolitical risk premium in the oil and gas markets will fall sharply if a truce is implemented, bringing down prices,” Leon said in the update.
“More importantly, the likelihood of a permanent peace agreement has now increased compared to just a few days ago, after the infamous televised clash between President Zelensky and President Trump in the Oval Office,” he added. “In addition to the obvious humanitarian benefits, a permanent ceasefire between Russia and Ukraine would have wide-ranging and sweeping implications for global energy markets,” he continued. Leon noted in the update that a ceasefire would most definitely include sanctions relief on Russian hydrocarbons, adding that a greater availability of Russian gas would push prices down, particularly the European gas benchmark TTF.
For oil, downside price pressure triggered by a permanent ceasefire might be more limited, Leon said in the update.
“Russian crude production is limited by its OPEC+ target and not so much by sanctions, but higher flows could materialize,” he said.
“At the same time, the end of hostilities would reduce the geopolitical risk premium in the oil markets,” he added. “Interestingly, a lower oil price might be more conducive for the U.S. to apply maximum pressure on Iran,” Leon noted. “The Trump administration may consider it easier to apply maximum pressure on Iran and lose around 1.5 million barrels per day of Iranian exports in a low-price environment with OPEC+ increasing production and amid growing Russian supplies,” he went on to state. Leon said in the update that global trade flows could also shift if a negotiated peace is reached. “As such, a resumption of some Russian piped gas to Europe could materialize,” Leon highlighted.
“We are still far away from a permanent ceasefire agreement between Russia and Ukraine, but these developments offer a glimmer of hope,” he added.
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