Oil volatility: the geopolitical spectrum and its implications

In the midst of geopolitical tension, oil markets remain cautious, affected by conflicts in the Middle East and Russian-Ukrainian relations.

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At the heart of the global chessboard, fluctuations in oil prices are inexorably linked to current geopolitical dynamics. Recent events in the Middle East and ongoing tensions between Russia and Ukraine are perfect examples of how regional crises can have a significant impact on global energy markets.

Geopolitical impacts on the oil market

Oil, although slightly down, remains at high levels, supported by a series of geopolitical crises shaking the main producing basins. Analysts at Rystad Energy, like Claudio Galimberti, point out that the risk premiums associated with tensions in Russia and the Middle East are significant. Despite attempts at a ceasefire, conflict zones such as Gaza and the Lebanese border continue to weigh on regional and global stability, exacerbating uncertainties on the oil market. Since December 2023, tensions in the Middle East have caused oil prices to soar.

Conflict dynamics and their influence

Israel’s recent bombardment of Gaza, in response to Hamas’ actions, and growing tensions with Hezbollah, illustrate the security risks prevailing in the region. At the same time, Houthi attacks on merchant shipping demonstrate the escalation of the conflict beyond the immediate borders of the war zones, indirectly affecting vital trade and oil routes.

The European outlook and its economic repercussions

In Europe, the situation in Ukraine remains a major flashpoint. Ongoing attacks on Russian energy infrastructure by Ukraine, and vice versa, not only exacerbate regional tensions but also affect energy market confidence. The planned integration of Ukraine and Moldova into the European Union represents an attempt to stabilize the region through economic and political means, projecting a future in which these countries can contribute more positively to the European energy market.
Despite occasional disruptions, oil markets have shown remarkable resilience, avoiding excessive price rises despite the many geopolitical risks. This phenomenon highlights the complexity of the economic and political interdependencies that characterize the contemporary era, where geopolitics continues to shape global energy markets.

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Indonesia has signed a memorandum of understanding with the United States to increase its energy imports. This deal, involving Pertamina, aims to diversify the country's energy supply sources.
VAALCO Energy continues to operate the Baobab field by renovating its floating platform, despite modest production. This strategy aims to maintain stable profitability at low cost.
An empty reservoir exploded at a Lukoil-Perm oil facility in Russia, causing no injuries according to initial assessments pointing to a chemical reaction with oxygen as the cause of the accident.
The British Lindsey refinery has resumed fuel deliveries after reaching a temporary agreement to continue operations, while the future of this strategic site remains under insolvency proceedings.
BP and Shell intensify their commitments in Libya with new agreements aimed at revitalizing major oil field production, amid persistent instability but rising output in recent months.
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The flow of crude between the Hamada field and the Zawiya refinery has resumed after emergency repairs, illustrating the mounting pressure on Libya’s ageing pipeline network that threatens the stability of domestic supply.
Libreville is intensifying the promotion of deep-water blocks, still seventy-two % unexplored, to offset the two hundred thousand barrels-per-day production drop recorded last year, according to GlobalData.
The African Export-Import Bank extends the Nigerian oil company’s facility, providing room to accelerate drilling and modernisation by 2029 as international lenders scale back hydrocarbon exposure.
Petronas begins a three-well exploratory drilling campaign offshore Suriname, deploying a Noble rig after securing an environmental permit and closely collaborating with state-owned company Staatsolie.