Energies have had a rough day, with WTI and Brent crude trading down 0.7% and 0.6%, respectively. That’s following an over 2% drop for each during the same day, amassing significant losses for some traders. As it seems, the primary weight pushing down energy security is the looming threat of global conflict. As you can assume, the focal point is the Ukraine-Russia conflict.
Russian-backed rebels have claimed that Ukrainians bombed them with mortars. That would violate agreements set in place to eliminate the conflict before it escalates. Russia is still building pressures, with nearly 100,000 troops near Ukraine’s borders.
However, some relief for energies comes from the nuclear deal Iran made with global forces in 2015. Although it seemed a fruitless effort, recent moves to reinvigorate the deal have shown results. France and Iran have both made statements saying that they’re closer to signing the deal. In the realm of energies, that’d take off the edge from the conflict a bit.
Namely, the potential new supply is welcome news for everyone. There’s a supply-demand deficit at the moment, and new energy sources are necessary for the global supply.
Although Iran urged global powers to be realistic with the deal, it seems like they managed to strike an agreement. France claimed that the deal was mere days away, deeming it more or less an inevitability. With the deal, South Korea seems to have also opened up to trading oil with Iran once more. Research from the Eurasia institute predicts a noticeable surge in Iran’s energy exports once the deal goes through.
With the Russia-Ukraine conflict still simmering, the prices for oil and other energies remain unpredictable. If tensions were to escalate, we could face major disruptions in production and supply. However, if the situation resolves peacefully, we might see oil prices drop further.
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