Russia-Ukraine War Impact on Energy Prices


  • Brent Crude Oil Price Outlook

Brent crude prices soared over the past month following news of Russia’s invasion of Ukraine. Markets were spooked by the threat the war poses to oil supply from Russia—which supplies approximately 10% of the world’s oil—either directly through damage to oil supply infrastructure, or indirectly via international sanctions and potential Russian retaliation. Although sanctions thus far have largely avoided hitting Russian energy exports, a recent bipartisan proposal in the U.S. House of Representatives to ban U.S. imports of Russian crude has revived market jitters regarding the supply outlook. A number of oil majors are already self-sanctioning and refusing to buy Russian crude, while strong European oil sanctions—although less likely—would further stoke prices. This comes amid an already-tight market, with global inventories at low levels and OPEC+’s refusal to more rapidly increase production quotas—and with some members of the oil cartel even having difficulties in reaching these targets.

Our Consensus Forecast expects Brent prices to fall 13.0% by year-end from February’s average prices, amid easing economic momentum and rising production. That said, upside risks to the outlook stemming from the war in Ukraine are significant. As such, we expect our analysts to continue revising their forecasts further upward if the conflict drags on. 

  • Henry Hub Natural Gas Price Outlook

Natural gas prices in Europe have recently soared to record highs due to Russia’s invasion of Ukraine. That said, U.S. natural gas prices have been relatively insulated from the effects of the military conflict, largely due to the country’s significant production capacity and limited export capacity. Nonetheless, Henry Hub natural gas prices rose strongly over the last month. U.S. supply remains tight, with the Energy Information Administration’s 3 March report indicating that production and inventories continued to fall, with inventories currently 13.4% below their five-year average. While forecasts of moderating weather in the U.S. helped to temper the bull rally somewhat, extremely high export demand—with U.S. LNG export terminals operating at full capacity—ensured another month of strong price increases. 

Nonetheless, our analysts see U.S. natural gas prices falling 18.0% as compared to February’s average by the end of 2022, as the winter cold snap recedes and as U.S. supply picks up. As with oil, the upside risk posed by the Russia-Ukraine war is substantial. If the war is prolonged, we expect our analysts to continue revising their forecasts further upward.


  • Coking Coal & Thermal Coal Price Outlook

The Russia-Ukraine war pushed up Australian coal prices significantly over the last month. The market was unnerved by the threat the invasion poses to Russian supplies of coal and its substitutes: oil and gas. Australia stands to benefit from the threat to Russian supply, as countries search for alternative sources. Prices were further supported by ongoing disruption to domestic supply caused by wet weather, and disruption to Indonesian supply due to the country’s ongoing export restrictions. That said, our analysts see prices gradually easing as the year progresses: Fading global economic momentum should ease demand, while increased Australian production should boost supply. As with oil and gas, the upside risk posed by the prolongation of the Russia-Ukraine war is sizeable.


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