The 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 reorientation 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 increase in global oil and gas prices. The cost of May futures for Brent crude during trading on March 9 surpassed $115 per barrel for the first time since late June 2022, reaching $118.7 per barrel, according to data from the ICE exchange. By 20:45 Moscow time, the price adjusted to $99.5 per barrel. The price of April gas futures at the TTF hub in the Netherlands exceeded $800 per 1000 cubic metres for the first time since mid-January 2023, reaching $824, before correcting to $671 per 1000 cubic metres. For comparison, on March 6, the price of oil was $92.7 per barrel, and gas was $641 per 1000 cubic metres, while on February 27 (prior to the onset of the armed conflict between the US and Israel and Iran) it was $72.9 per barrel and $390 per 1000 cubic metres, respectively.

The rise in oil prices accelerated following reports of production cuts in Kuwait due to overflowing storage facilities. Another driver was the forecast from Qatar's energy minister, who suggested that production might halt in all Gulf countries. The increase in gas prices was spurred after QatarEnergy announced, on March 2, the suspension of liquefied natural gas (LNG) production in Qatar. The actual halt of shipping in the Strait of Hormuz, which connects the Persian Gulf to the Gulf of Oman in the Indian Ocean, has led to a surge in tanker freight rates in the Middle East to record levels (as reported by Vedomosti on March 4).

During the meeting, Putin noted that the current high commodity prices are of a temporary nature. However, global logistics under the conditions of an ongoing conflict in the Middle East will change in favour of more profitable and promising markets, and the alteration in the balance of supply and demand for hydrocarbons caused by the prevailing situation will lead to a new sustainable price reality, he emphasised.

According to Putin, logistical issues on hydrocarbon transport routes negatively impact production chains and the entire system of international economic relations. Disruptions in supply lead to economic challenges, inflation rises, and production of industrial goods decreases, the president explained.

He noted that in 2025, about one-third of the world's maritime oil exports transit through the Strait of Hormuz—14 million barrels per day, of which approximately 80% are destined for Asia-Pacific region (APR) countries. At the same time, a complete switch of Middle Eastern oil supplies without the use of the Strait of Hormuz is not possible, the president stated. Alterations in logistics will require significant investments in infrastructure, expansion of maritime terminals, and will entail high political risks, Putin elucidated.

A similar situation, he stated, is unfolding in the global gas market: LNG supplies from the Middle East have sharply decreased, and it is not feasible to quickly compensate for the shortfall.

The president pointed out that the dynamics in the global oil and gas market are such that a rapid reorientation of exports towards markets in need of increased supply could secure a foothold there. These are countries with stable long-term demand and "reliable long-term relationships," Putin noted.

He reminded that Russia is a reliable supplier of energy resources and will continue to supply oil and gas to those countries that are dependable counterparts. This includes not only APR countries, but also states in Eastern Europe, such as Slovakia and Hungary, he stressed. At the same time, the European Union plans to cease energy purchases by 2027, he reminded. Consequently, the government has been tasked with assessing the feasibility of halting energy resource supplies to the European market and redirecting these volumes to "more interesting directions" while cementing their position in those markets, he emphasised. However, the president did not rule out that Russia would supply oil and gas to Europe, should it receive signals of readiness to depart from the political context in this area.

The ongoing rise in oil and gas prices is largely attributed to a reassessment of risks by insurance companies, which have effectively refused to cover force majeure circumstances for shipments through the Strait of Hormuz, believes Sergey Tereshkin, CEO of Open Oil Market. Meanwhile, the price surge has accelerated against the backdrop of attacks on oil and gas infrastructure, as noted by Maxim Shaposhnikov, advisor to the managing fund "Industrial Code," and Igor Yushkov, expert at the Financial University under the Government.

Experts believe that in the coming days, the price of Brent crude will hover around $100 per barrel. In the short term, quotes could rise to $150 per barrel, but these will be temporary spikes, Shaposhnikov highlights. Yushkov concurs with him. Subsequently, the price may decrease to $80-85 per barrel, Shaposhnikov states.

Read more: VEDOMOSTI