Energy Prices Rise Due to Positive Trade and Geopolitical Developments

The recent parallel developments in the Ukraine conflict and the trade war are causing a resurgence in energy prices. Announcements from the White House regarding an impending trade deal with China have calmed international markets, once again reversing estimates about global trade and production. Simultaneously, negotiations over Ukraine are reducing geopolitical risks, as is the ceasefire between India and Pakistan. Consequently, the security premium on energy prices is diminishing, though it was already limited since markets no longer react strongly to such developments as they did in previous years. As a result, these developments have positively impacted prices. On Monday, crude oil saw significant gains. The Brent contract for Europe settled at $66 per barrel, while the corresponding U.S. WTI reached $63. Both had previously fallen below $60. This is good news for producers in the U.S. and OPEC. In the former case, new shale drilling operations are estimated to require a price above $60 to be viable. Meanwhile, OPEC has recently relaxed production targets and now benefits from better prices alongside increased quantities. Similarly, European natural gas prices followed suit, with the TTF contract approaching €36/MWh. This occurs during a period when European gas storage facilities are filling up satisfactorily ahead of next winter. Naturally, the end consumer will be affected, having enjoyed lower prices at the pump and on electricity bills in recent months. Now, with summer approaching, the trend is clearly upward, and further developments remain to be seen.