Armed conflict in the Middle East may lead to a shift in the balance of supply and demand in the global oil and gas market, creating conditions for the redirection of Russian energy supplies. This was stated by Russian President Vladimir Putin during a meeting on the global oil and gas market situation on March 9.

The meeting followed a sharp rise in global oil and gas prices. The price of May futures for Brent oil during trading on March 9 exceeded $115 per barrel for the first time since late June 2022, reaching $118.7 per barrel, according to ICE exchange data. By 20:45 MSK, the price corrected to $99.5 per barrel. The price of April futures for gas at the TTF hub in the Netherlands exceeded $800 per 1,000 cubic meters for the first time since mid-January 2023, reaching $824. It then corrected to $671 per 1,000 cubic meters. For comparison, on March 6, the price of oil was $92.7 per barrel, gas was $641 per 1,000 cubic meters, and on February 27 (before the onset of the armed conflict between the USA and Israel and Iran) – $72.9 per barrel and $390 per 1,000 cubic meters, respectively.

The rise in oil prices accelerated following reports of production cuts in Kuwait due to overflowing storage. Another driver was the forecast from the Qatari Minister of Energy, who suggested a halt in production across all Gulf countries. Gas prices were further propelled upward following a statement on March 2 from QatarEnergy regarding the suspension of liquefied natural gas (LNG) production in Qatar. The actual halting of shipping in the Strait of Hormuz, which connects the Persian Gulf to the Gulf of Oman in the Indian Ocean, led to a spike in tanker freight rates in the Middle East to record levels, as reported by "Vedomosti" on March 4.

Putin noted during the meeting that the current high commodity prices are temporary. However, global logistics for energy supplies will change in favor of more lucrative, promising markets due to the continuing conflict in the Middle East. He underscored that the shift in the balance of supply and demand for hydrocarbons, driven by the current situation, will lead to a new sustainable price reality.

According to Putin, logistical challenges in the transportation routes of hydrocarbons have a "most negative" impact on production chains and the entire system of international economic relations. The disruption of supplies leads to economic issues, rising inflation, and reduced production of industrial goods, the president explained.

He emphasized that in 2025, approximately one-third of the world's maritime oil exports, or 14 million barrels per day, passed through the Strait of Hormuz, with about 80% directed to Asia-Pacific region (APR) countries. However, he noted that it is impossible to completely redirect Middle Eastern oil supplies without using the Strait of Hormuz. Adjusting logistics will require significant expenditure on infrastructure and the expansion of maritime terminals and will be associated with high political risks, Putin explained.

He stated that a similar situation is arising in the global gas market, where LNG shipments from the Middle East have drastically decreased, and it is not feasible to quickly compensate for the lost volumes.

The president pointed out that the dynamics of the global oil and gas market are such that a rapid redirection of exports to markets requiring increased supplies could enable countries to establish a foothold in those markets. These are countries with strong long-term demand and "reliable long-term relationships," noted Putin.

He reminded that Russia is a reliable energy supplier and will continue to supply oil and gas to those countries that are dependable counterparties. These include not only APR countries but also Eastern European states such as Slovakia and Hungary, Putin clarified. At the same time, he reminded that the European Union plans to cease energy purchases by 2027. In this regard, the government has been tasked with assessing the feasibility and practicality of halting energy resource supplies to the European market, redirecting these volumes to "more interesting directions," and establishing a presence in those markets, he emphasized. The president did not rule out that Russia would supply oil and gas to Europe if it receives signals from them indicating a readiness to discard political circumstances in this area.

The ongoing rise in oil and gas prices is largely attributed to reassessing risks by insurance companies, which have effectively stopped covering force majeure situations for shipments through the Strait of Hormuz, according to Sergey Tereshkin, General Director of Open Oil Market. Additionally, the price rise has accelerated amidst attacks on oil and gas facilities, noted Maxim Shaposhnikov, advisor to the managing fund "Industrial Code," and Igor Yushkov, an expert from the Financial University under the Government of the Russian Federation.

Experts believe that in the coming days, Brent oil prices will remain around $100 per barrel. In the short term, prices may spike to $150 per barrel, but these will be temporary jumps, Shaposhnikov noted. Yushkov agrees with him. Subsequently, the price may decrease to $80-85 per barrel, Shaposhnikov says.

Read more: VEDOMOSTI