Short-term bets on oil risky amid geopolitical uncertainty: Vandana Hari
Oil markets are in a holding pattern due to uncertainty surrounding the Russia-Ukraine war and potential shifts in Western sanctions. The focus has shifted from a quick ceasefire to a longer-term resolution of territorial disputes and security guarantees. Market participants are adopting a wait-and-see approach, as the path to a resolution is expected to be lengthy and complex.
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"If we take a step back, something has changed fundamentally compared to how the oil markets viewed the situation before last Friday's summit between Trump and Putin. The summit and subsequent events, including Trump involving Zelenskyy, have altered the outlook. Until last Friday, the focus was on a potential ceasefire, which I viewed as a quick solution—a resolution, yes, bringing peace—but leaving the fundamental reasons behind the conflict unresolved," says Vandana Hari , Vanda Insights.Crude is likely to remain in a holding pattern. As you pointed out, there isn't much for oil markets to go on when it comes to assessing what will happen with the war in Ukraine, and consequently, how Western sanctions and embargoes against Russian oil might evolve. This, in turn, affects expectations regarding Russian oil flows—whether there will be future disruptions or if they will continue as they are now. So, there are a lot of dots to connect for the oil markets.If we take a step back, something has changed fundamentally compared to how the oil markets viewed the situation before last Friday's summit between Trump and Putin. The summit and subsequent events, including Trump involving Zelenskyy, have altered the outlook. Until last Friday, the focus was on a potential ceasefire, which I viewed as a quick solution—a resolution, yes, bringing peace—but leaving the fundamental reasons behind the conflict unresolved.What has changed now is that the ceasefire seems off the table, and attention is shifting to resolving the much bigger issues: the territorial dispute between the two countries and Ukraine's security guarantees. For oil market participants, this means adopting a wait-and-watch approach. Moving from a potential ceasefire to a full resolution will clearly take much longer. It's going to be a longer, more winding, and more difficult path. So, there isn't much point in making bets on whether to go long or short on oil right now. It's just a wait-and-watch scenario.Even while we're in a holding pattern, it's worth considering what could happen in the next two weeks. The timelines I've seen suggest two weeks, according to Trump and some European leaders; one European leader mentioned it could take up to three weeks. It could drag on longer.In the meantime, there is a chance things could deteriorate. The next step is a bilateral meeting between Zelenskyy and Putin, based on what Trump said after his meetings. These two leaders haven't met since the war began. There's a possibility it could revert to a stalemate or even worsen. At that point, Trump might consider imposing secondary tariffs on countries like China, Turkey, or Brazil, but that remains speculative.My base case is that this process could drag on beyond two to three weeks. I don't see a high likelihood of Trump imposing secondary tariffs on China or Brazil, given existing trade tensions, which means the picture for Russian oil supply and related market concerns wouldn't change much in the near term.
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