What Awaits Oil and Natural Gas Prices?

What Awaits Oil and Natural Gas Prices?

2022-02-01 • Updated

Geopolitical tensions are casting shadows on energy and oil markets with increased concerns about the potential invasion of Ukraine by Russia. In addition, the United States and its Western allies are considering imposing sanctions on Russia. So let's see how a possible escalation of tensions can impact markets. 

1. Natural gas

Energy markets will be the most affected if tensions turn into an actual conflict or in case of economic sanctions on Russia. Ukraine is a major player when it comes to transferring energy. Most of the Russian natural gas exports pass through Ukraine. 

Europe depends on Russia to get about 40% of its natural gas, which comes across pipelines that move through Belarus and Poland down to Germany. Besides, Nord Stream 1 goes directly to Germany and other countries across Ukraine. As part of possible sanctions, Germany said it might halt the new Nord Stream 2 gas pipeline from Russia if the latter invades Ukraine. If sanctions are imposed, markets expect natural gas exports from Russia to Western Europe via Ukraine and Belarus to decline significantly, pushing gas prices above $6.3 reached in late 2021.

2. Crude oil

Of course, oil markets will also be affected by sanctions or disruptions. Russia is the second-largest oil producer in the world. 

Oil prices have already broken $90 a barrel for the first time since October 2014 on the back of political statements and news. That makes $100 a barrel possible soon, especially with the growing threats to the UAE from Yemen's Houthi movement. The negative news means supply disruptions, pushing prices to further highs.

JP Morgan believes that tensions threaten to create a "significant rise in oil prices." They pointed out that oil reaching $150 a barrel will reduce global GDP growth by 0.9% annually in the first half of the year, and inflation will exceed 7.2%. 

3. Safe havens

The geopolitical concerns usually push investors back to US and German bonds, the safest asset. It might not be different this time. 

In currency markets, EUR/CHF reflects geopolitical risk in the Eurozone. As a result, the Swiss Franc is considered one of the most potent safe havens. That's why it's not surprising that the franc has reached its highest level since May 2015, at the beginning of last week.

4. Grain and wheat

Any interruption in the flow of grain from the Black Sea region may affect the prices of these goods. It will also intensify food price inflation after the COVID-19 recession. 

Four major exporters and producers of grain - Ukraine, Russia, Kazakhstan, and Romania - ship their goods from the Black Sea ports. Disorders may happen if any military action or sanctions on Russia appear. 

According to data of the International Grain Council, Ukraine is expected to be the third-largest exporter of corn in the world in the 2021/22 season and the fourth-largest wheat exporter. Russia is the largest exporter of wheat in the world. The geopolitical risks in the Black Sea region will affect wheat, grain, and energy, pushing prices to rise higher.

Similar

WTI and Brent React To a Key Pivot
WTI and Brent React To a Key Pivot

Brent oil is currently on a bullish trend, facing resistance near $84 and supported by the 200-day EMA. Breaking above this level could lead to a climb towards $90. Short-term support is observed around $80, backed by the 50-day EMA. As summer approaches and travel increases, crude oil tends to benefit from seasonal patterns. Despite temporary setbacks, buying...

Oil In The Geopolitical Lens: Soars And Dips Under The Influence Of Global Events
Oil In The Geopolitical Lens: Soars And Dips Under The Influence Of Global Events

Amid uncertainty driven by geopolitical events, oil prices surged to record highs. However, a correction in oil prices is observed with a gradual improvement in the situation in the Middle East and an increase in demand. The question facing investors is whether there are prerequisites for further price growth or if everything depends on the dynamics of the political landscape. In this article, we will explore the impact of recent events on the global oil market and the prospects for developing this crucial commodity sector.

Latest news

CHF: Key Zone Could Yield Strong Reactions
CHF: Key Zone Could Yield Strong Reactions

USD/CHF saw a rebound after declining for two days straight, climbing towards the important psychological level of 0.8800 during Wednesday's early Asian trading session. There's some pressure on the Swiss Franc (CHF) as traders await the Swiss ZEW Survey – Expectations report scheduled for later today. Moreover, investors are keeping...

USD Expected To Recover Some Strength
USD Expected To Recover Some Strength

In the early hours of Tuesday, the US Dollar faces challenges in maintaining its strength against major currencies, with the US Dollar Index struggling to surpass the 104.00 mark. Investors are eagerly anticipating the release of key economic data, including January Durable Goods Orders and the Conference Board's Consumer Confidence Index for February. Additionally, the economic calendar includes reports...

CAD: Price Delivery Suggests Strength
CAD: Price Delivery Suggests Strength

In the early hours of Tuesday, the US Dollar faces challenges in maintaining its strength against major currencies, with the US Dollar Index struggling to surpass the 104.00 mark. Investors are eagerly anticipating the release of key economic data, including January Durable Goods Orders and the Conference Board's Consumer Confidence Index for February. Additionally, the economic calendar includes...

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera