Short-term bets on oil risky amid geopolitical uncertainty: Vandana Hari
ADVERTISEMENT Just trying to second-guess where oil markets are headed. Nothing significant emerged from all the meetings that took place yesterday. It doesn't seem like there's a clear truce between Russia and Ukraine so far. But where do you think crude is headed?
Vandana Hari: 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.
At the same time, Trump is proposing a trilateral gathering going forward. If a peace deal is signed and the supply of Russian oil increases, do you think there will be a change in direction, especially since Trump currently claims to be a peacemaker?
Vandana Hari: 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.
ADVERTISEMENT 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. Unlock 500+ Stock Recos on App 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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