Dr. Cyril Widdershoven‏‏

Global oil markets are showing increased volatility. Market fundamentals remain strong, but a possible worldwide recession is on the horizon. At the same time, Asian giants China and India are displaying mixed signals: Beijing continues to struggle with the impact of COVID, while India is deploying its own energy strategies. Europe’s energy markets are facing an extreme hit, with some short-term relief due to the availability of high-priced LNG imports, but 2023 is forecast to be a troublemaker, as energy demand could be much higher than the global market is willing to reroute to the Old Continent. US oil and gas production is still not hitting the levels that some analysts have forecast. 2023 could be a watershed moment for European governments, as their current energy strategies are not going to bring much real relief. As long as the Russian invasion of Ukraine continues, Europe’s energy sector is staring into the abyss, and the worst is yet to come.

Navigating the Future of the Global Market in 2023

Turmoil in Oil:

Global energy markets have changed dramatically during 2022. Global economies are now dealing with the repercussions of the Russian invasion of the Ukraine on top of the effects of the COVID-19 pandemic, which has pushed major economies to the brink. Global energy patterns and investments are clearly grappling with both direct and indirect impacts of ongoing shifts in the global balance of power, the changing position of China and Asia, and an increased focus on energy security. The West has been confronted by a cataclysmic situation as its historically stable energy supply has become unpredictable. Its reliance on Russia as the single supplier of natural gas and crude oil has become a threat to its security and economic and social stability. Escalating Western sanctions on Russia have at times backfired as shortages of much-needed oil and natural gas have resulted in an energy market crisis and economic recession at home. For Europe and the UK, the new strategic goal has been to diversify the energy supply and identify new energy sources.

How Can the EU-GCC Cooperate Strategically in the Energy Sector Shift?

A New Way Forward:

Global energy markets are trying to find their footing even as the full impact of the Russian invasion of Ukraine on security and energy markets remains unclear. Initial fears of a Russian natural gas blockade of European markets have not yet materialized. However, Moscow is now facing increasingly stringent Western sanctions on its economy, targeting both Russian elites and the country’s military. At the same time, discussions are ongoing regarding the implementation of an EU 6th Sanctions Package, which would potentially suspend or terminate Russian exports of energy and petroleum products to the European Union.

Russian War on Ukraine Reshapes Energy Markets

Protracted Volatility:

International media and government assessments of the Ukraine-Russia conflict have occupied the headlines and minds of many throughout the world in recent weeks. The ongoing build-up of Russian forces along Ukraine’s border has been primarily analyzed through the lens of Russia-NATO tensions or the European energy crunch. A potential military engagement or incursion by Russia into Ukraine will not only disrupt Russian oil from reaching European consumers, but the expected harsh economic and financial sanctions on Russia in such a case could also severely curtail Moscow’s oil and gas exports to markets worldwide. If Russian energy is removed from the already tight global energy markets, then the world may be heading for a possible economic and security meltdown.

Developments in Ukraine Jeopardize Feedstock Supply for the MENA Region

Protracted Crises:

2021 was a very volatile period for oil and gas operators, investors, and traders alike. The continuing pressure of COVID-19 constraining partial economic growth in major markets, unexpected high demand growth for crude oil, natural gas and petroleum products, and a hard-fought market stabilization by OPEC+, have all shaped this past year. In recent months, however, another event has popped up, coming as a surprise to some. Major OECD markets, especially the EU, USA, and China, are feeling the negative impact of energy transition and lack of stores, resulting in a so-called energy crunch. Demand for hydrocarbons in these key global markets increased substantially, while domestic production and backup storage represented major constraints. European natural gas markets are in for a cold winter, as their main natural gas supplier, Russia, has encountered parallel domestic and foreign crises. These issues include the geopolitical wargames in Ukraine and Belarus and the construction of the new natural gas pipeline, Nord Stream 2.

Dr. Cyril Widdershoven‏‏

Dr. Cyril Widdershoven‏‏

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