Oil market reacts to possible de-escalation in Ukraine: what it means and what to expect next
24 March 16:10
Oil prices fell by more than 2% following reports of truce talks between Russia and Ukraine. Investors took the possible easing of geopolitical tensions as a signal that the risk of disruptions in energy supplies, especially from the Black Sea, was reduced.
Why the fuel market reacts so strongly to news from the military and diplomatic fronts and how oil price fluctuations will affect the Ukrainian economy, [comersant] analyzed together with energy expert Gennady Ryabtsev.
on March 22, 2025, global markets reacted to the first signs of de-escalation in one of the longest-running military conflicts in recent years. Following reports of the start of truce talks between Ukraine and Russia, oil prices fell by more than 2%, hitting multi-week lows.
According to Bloomberg, Brent dropped to $83.70 and WTI fell to $78.45 per barrel. This is the sharpest pullback since March, which demonstrates the high sensitivity of the commodity market to geopolitical news.
Key factors behind the price decline
1. Truce as a risk mitigating factor
Both parties to the conflict – Ukraine and Russia – have begun discussing a temporary truce with the mediation of third countries. So far, the talks are about freezing active hostilities, especially in areas close to export infrastructure.
This reduces the likelihood of disruptions in the supply of oil and grain from the region, especially through the Black Sea, a key export route.
“Even if this ceasefire is fragile, the very fact that it is being negotiated signals to the market that the worst may be over,” – says UBS analyst Giovanni Staunovo.
2. Expectations for the return of export flows
Exporters expect that the partial normalization of logistics in the Black Sea region will allow them to increase the supply of raw materials, especially from Ukrainian ports, which have been operating intermittently or blocked altogether.
Russian oil exports may also accelerate as the easing of hostilities reduces risks to tanker routes.
3. Excess reserves in the US
The US Department of Energy reported an unexpected increase in crude oil stocks by 4.2 million barrels over the week, which exceeded forecasts. This increased pressure on the price, especially amid weak domestic demand.
“Oil prices are falling due to a significant excess of supply over demand. That is, there is now much more oil being produced than consumed,” explains energy expert Gennady Ryabtsev.
4. Declining demand from China
Bloomberg also notes that industrial production and oil consumption in China have weakened in recent weeks, in particular due to measures to curb inflation and falling demand in the real estate sector. For the global market, this means lower expectations for consumption growth.
Analyst and market reaction
European stock markets experienced moderate growth, especially in the energy and transportation logistics sectors.
In currency pairs, the ruble and hryvnia strengthened amid expectations of possible stabilization.
Analysts are urging caution: even if the ceasefire is formalized, the market will remain volatile until there are signs of long-term peace.
What it means
For European countries, this is a chance to reduce pressure on the energy sector and inflation. For Russia, it means a potential restoration of export logistics. For the global oil market, it is a test of resilience: will prices be able to stay within $80-85 with a gradual return to stability?
For Ukraine, the decline in oil prices on the global market has so far affected the price of fuel at gas stations. According to Gennadiy Ryabtsev, they have fallen by an average of 50 kopecks and are likely to continue to decline in April.
How the situation will develop in the future
Gennadiy Ry abtsev emphasizes that the quotes have been declining for a long time.
“And I think they will continue to decline, especially if OPEC member states decide to lift production restrictions, which is expected to happen in early April,” the expert says.
Meanwhile, analysts whose forecasts are cited by Bloomberg and Reuters in their materials consider several possible scenarios.
Among them:
- formalization of the 30-day truce between Russia and Ukraine. For the oil market, this would mean further price declines and increased supply;
- failure of the negotiations. In this scenario, there will be a sharp jump in quotations;
- partial peace agreements. In this case, prices for petroleum products will stabilize as early as April at $80-85 per barrel.
- deployment of peacekeepers to Ukraine. Analysts believe that such a development in the global economy will increase market confidence and reduce risks.
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