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Oil – 4 potential Russia-Ukraine scenarios and impacts on the energy market

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4 scenarios with likelihood according to bank analysts:

The first is the current status quo with a probability of 75%

  • We expect the situation in the energy markets to remain unchanged. Nevertheless, in this scenario, natural gas prices remain high for longer as markets remain tight, at least until spring 2023. In the event of severe winter weather, either in Europe or Asia or both, pressure would increase in the LNG markets. However, these additional price gains will likely disappear as soon as the cold spell ends.

2 is a de-escalation that leads to normalization of the markets, assessed at 15% probability

  • Energy markets would begin to normalize. There will be sufficient gas supply available for consumers in Europe during the year 2022. Natural gas prices would normalize towards pre-2021 levels of lows 20 euros/MWh or even lower as soon as the tight market conditions for this winter will be restored. on.

3 is an escalation of tensions, with Russia halting gas exports to Europe, a 5-10% chance

  • In the absence of a short-term alternative to fully replace Russian gas exports to Europe, energy supplies would have to be rationed, especially for industry. Additionally, natural gas prices would rise significantly and reach new highs across much of the forward curve. Monthly TTF contracts could trade above 200 EUR/MWh for an extended period, with peak prices significantly higher. As an indirect effect, electricity prices would increase throughout Europe.

And 4 is a bigger escalation, which would also affect oil markets. Assessed at < 5% probability

  • Russia would decide to stop oil exports to Europe. Such a development in oil markets would cause oil prices to rise. Oil prices would trade above $100/bbl and in the event of serious supply concerns, they would even head for a retest of the all-time high ($149/bbl). Due to tighter market conditions, this situation could persist for the rest of the year.

Oil – 4 potential Russia-Ukraine scenarios and impacts on the energy market

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