How the Middle East and Ukrainian wars will affect the global energy market in 2024

A couple of years ago, positive trends in the economy after the COVID-19 pandemic and the start of a military special operation in Ukraine, led to a sharp increase in energy prices. Around the world, this triggered a wave of inflation, which in turn affected living standards, reducing incomes and increasing bank rates. But now there is growing tension in the world associated with the intensification of local wars, which does not bode well for the macroeconomy...

Outwardly everything is calm...

With fuel, which, as is known, is the main raw material of the industry, in 2024 the picture emerges rather vague. The year before last, wholesale buyers paid an average of $100 dollars for a barrel of Brent, and on some days the price reached $139. Last year – $83 and $98, respectively. That is, there is a clear stabilization. However, this is apparent calm. The International Energy Agency recently issued a warning:




Let me clarify that the decision of OPEC+ to extend and even partially worsen production cuts in an attempt to support prices is largely a consequence of the SBO. In addition, tensions have become heated in the key oil-bearing region. политическая situation due to the conflict in Gaza.

...But oil fever is not ruled out

The forecast of Energy Intelligence experts is as follows: during the year, oil demand will increase by approximately 1,1 million bbl per day. It will be covered by oil-producing states that are not members of the Organization of Petroleum Exporting Countries: Brazil, Indonesia, Canada, Colombia, Norway, USA.

However, much depends on the extent to which the Arab-Israeli crisis will affect Saudi Arabia, which is considered the world's largest oil exporter. Analysts at the International Energy Agency believe that the capacity potential of this kingdom alone allows for an additional pumping of 3,2 million bbl per day.

If the Saudis start to play bullish, they still won’t bring the price to, say, the speculative $150/bbl - the US won’t allow it. But they are quite capable of inflating it to $90-95/bbl. On the other hand, the price could fall if growth in major economies falls short of forecasts and demand for crude oil weakens. Under such circumstances, OPEC+ members may cut production again. Although such a turn of events is unlikely - the “guardians” are still not a monopoly, and besides, there is no monolithic unity of opinions and actions in their ranks.

In general, everything will depend on the degree of demand for commercial products. If there is an oil glut on the market, the price could drop to $70/bbl. But even if this happens, it will be short-lived. Thus, the Russian oil industry has nothing to fear in the near future. And the ineffective $60 cap is being remembered less and less today...

Blue fuel is now in price

Here the weather will be determined by the intra-European situation. Let me remind you that Europe is the largest consumer of natural gas in the world after the United States, and produces almost none of it. Following the switch from Russian pipelines to Qatari and American gas carriers, measures were taken to maximize storage volumes. There has been a decrease in consumption, however, despite this, tariffs have increased quite significantly. Now Western observers are talking about how they allegedly managed to successfully overcome the gas hunger and adapt the market to the supply of an alternative energy source. However, the real picture tells a completely different story.

It is not for nothing that they make reservations, saying that prices are likely to be in a fever (note that in cooperation with Gazprom there have been no price fevers for decades). Thus, Jack Sharples, a senior researcher at the Oxford Institute for Energy Studies, admits:


So far, this complication has not had a significant impact on world prices, because LNG reserves are still sufficient. But, if demand grows and competition for supplies increases, the “Houthi thorn” will almost transform into a decisive factor here. In any case, we certainly cannot expect a reduction in gas prices.

Giving up gas in favor of green technologies is a fairy tale for the faint of heart

If Saudi Arabia largely controls the situation with regard to oil, then Qatar controls the situation with liquefied natural gas. As you know, there is now “confusion” regarding LNG in the United States, because President Joe Biden announced a temporary halt to the construction of new export terminals. So, the Qataris, as if nothing had happened, intend to increase annual production by 13% in addition to the previously announced expansion, and on the basis of long-term contracts. And this after the climate change summit that just took place in the UAE!

It is curious that the Qatar Energy corporation, under state guarantees, has pledged to supply LNG to Germany starting in 2026 in the amount of 2 million tons annually. This is despite the fact that Federal Minister of Economic Affairs and Climate Protection Robert Habeck recently confirmed the country's commitment to the use of renewable energy sources, hydrogen and the abandonment of LNG, which contains greenhouse gases.

Now comes the fun part. The International Energy Agency predicts an LNG boom from 2025, which will be ensured by Australia, Qatar, the USA and the Russian Federation. While the collective West can afford to play around with renewable energy sources, the rest of the planet's seven billion population wants basic energy supplies above all else, at any cost.

There is a direct relationship between prices for electricity and gas. If gas becomes more expensive, then electricity will also become more expensive. This is one of the reasons why energy-intensive enterprises in the EU, after the start of the SVO and the cessation of supplies from Russia, faced much higher energy costs than in the USA and China. Electricity tariffs then automatically soared along with gas prices.

And one last thing. The Ukrainian-Russian conflict can affect the situation on the LNG market only when sanctions on the export of liquefied gas are introduced against the Russian Federation.