As for oil markets, a peace deal would mean no additional and/ or secondary sanctions on Russian oil and natural gas. However, if Trump had walked out of the meeting (a la Reagan in Reykjavik), expectations would be for immediate and increased sanctions and ramped-up enforcement of existing ones. Choking off Russia’s oil sales to India and China would deprive Russia of money to continue its war against Ukraine, which is costing more every day in the loss of manpower and weapons that must be purchased to continue waging the war.
Cutting a couple of million barrels a day of oil from the global market would create a shortage and boost oil prices in response. No sanctions would keep Russian oil flowing into an oversupplied market. The lack of an answer kept daily oil prices bouncing up and down, but in the lower half of the new $60–$70 trading range.
The International Energy Agency added further pressure on oil prices with a new report predicting a worsening oversupply, continuing its narrative that the Age of Oil is facing an imminent ending in a matter of years. Major international oil companies disagree with that assessment. Furthermore, several major producers have reduced their renewable energy goals and ramped up their oil and gas exploration and development efforts.
A new report from energy consultant Wood Mackenzie supports those producers’ strategic shifts. It notes that the move from internal combustion engine cars to electric vehicles globally has slowed dramatically, which will slow the global energy transition. The consultant says the world will need about 5 percent more oil per year than previously forecast from the mid-2030s. This means the industry must deliver more than 100 billion extra barrels of oil and gas from new exploration by 2050 to help fill the projected gap. The firm is now warning about the need for increased exploration to meet the projected demand, something the industry has been shunning in recent years. This is a prescription for higher oil prices in the future.
Uncertainty surrounding peace agreements, tariffs, and geopolitical tensions worldwide, along with concerns about economic growth, will continue to dominate the near-term price action of oil and other energy commodities.
NATURAL GAS
The Dog Days of Summer are here, and natural gas markets are in limbo. Heat drives air conditioning demand, i.e., electricity consumption, which is heavily dependent on natural gas for generation. Various regions of America have experienced heat waves, but these have not been universal, severe, or extended. Therefore, the domestic gas industry continues operating within normal conditions—production remains steady, gas injections into storage for the upcoming winter remain healthy, and liquefied natural gas exports continue at a normal pace. The result is that natural gas prices continue to trade around the $3 per thousand cubic foot level.
The market appears poised for an event that will give it direction. Such an event could be a hurricane that upsets either gas supply or demand, or both. We are entering the peak hurricane period, which extends through early October, so gas traders are anxiously watching the storm charts. The National Oceanic and Atmospheric Administration forecasts 13–18 named storms this year, with 5–9 hurricanes and 2–5 major hurricanes. Most other forecasting groups’ projections fall within these ranges. Hurricane Erin marks the fifth named storm of the season, and the first hurricane and first major hurricane. Projections, at the time of writing, indicate that Erin will remain an ocean storm, impacting the US East Coast with only wave action. By remaining out of the Gulf of Mexico and well offshore, Erin will have had no impact on gas supply or demand.
Gas storage continues to build rapidly. It is well above the five-year average for storage volumes. It is quickly approaching 2024’s weekly storage volumes, which eventually reached the five-year peak volumes. Should that track be maintained, gas prices will likely come under pressure in the coming weeks, assuming no change in other forces that impact the gas market.
The latest global gas market developments include the uncertainty of the Russia-Ukraine peace agreement, and a new narrative that the energy transition will cause gas demand to peak in the 2030s, like global oil demand forecasts. Much like the fears about oil prices, a Russia-Ukraine peace agreement could see European countries welcoming Russian gas back into their energy market. That likelihood was reduced by the US-EU trade deal calling for $750 billion in energy purchases over the next three years. However, no one knows what the concessions in achieving a peace agreement might entail.
Regardless of a peace agreement, the idea that global gas demand growth rates may slow is a possibility. However, it is impossible to believe gas consumption growth will stop in the foreseeable future. Global electricity demand is growing faster than ever, and Asian and African nations will use their gas resources to avoid continued growth in coal use. Rising standards of living throughout the southern hemisphere will drive increased gas use, as will economic activity in Western nations.
GEOPOLITICS RILE COMMODITY MARKETS
NATURAL GAS MARKETS ARE WAITING FOR DIRECTION
This feature appeared in ON&T Magazine’s 2025 September Edition, Decarbonizing the Blue Economy, to read more access the magazine here.
