Tensions in the Persian Gulf continue, but the reaction of the energy markets is not uniform. While oil retains a noticeable geopolitical premium, natural gas appears to be influenced primarily by seasonal factors, inventory levels, and regional balances. In this context, we asked Laurențiu Urluescu, president of the Association of Electricity and Natural Gas Suppliers in Romania (AFEER), why the gas market is reacting differently and how sustainable this decoupling from oil might be.
Why is the oil market reacting differently from the natural gas market in the current situation in the Gulf?
The difference is not accidental. We have two markets with fundamentally different structures, and their reactions reflect distinct constraints. The oil market is global, liquid, and integrated. Thus, any geopolitical risk is quickly reflected in the price in the form of a “risk premium.” Furthermore, commercial and strategic stocks play a limited role in absorbing major shocks over the long term, which supports this premium.
For natural gas, the situation is more technically constrained. We are talking about regional markets, dependent on infrastructure and with low short-term elasticity. Gas cannot be redirected as easily as oil, and the price is dominated by the local supply-demand balance. Thus, here we have a dependence on seasonal factors.
To what extent do seasonal factors mitigate the impact of geopolitical tensions on natural gas prices?
The impact of geopolitical tensions in the Gulf on natural gas has not disappeared, but it has been significantly diluted: the gas market does not react to global risks in advance to the same extent as the oil market, because it lacks the same transmission mechanisms.
Reduced seasonal demand, combined with replenished inventories and weaker competition from Asia for LNG, limits pressure on prices. Additionally, the contribution of renewables to the electricity mix reduces marginal dependence on gas during this period.
This is a temporary situation; if we enter a peak season or if there is an actual disruption in LNG flows, this “immunity” will quickly disappear. Until then, however, seasonal factors act as an effective buffer, reducing the transmission of external tensions into prices.
How well is Europe protected from a more severe shock in the gas market through the diversification of sources and the flexibility of LNG?
Protection exists, but it is not complete and should not be overestimated. The European gas market has undergone a rapid process of diversification, and alternative routes – particularly LNG – have reduced dependence on single sources. The Gulf crisis appears to have only an indirect impact on Europe, as a significant portion of imports comes from diversified sources (the U.S., Africa, Norway), and volumes from the Gulf region are not dominant in the current mix.
However, we must remain cautious; LNG’s flexibility works under balanced market conditions; when aggressive competition for cargoes or major logistical disruptions arise, this flexibility is drastically reduced. We must not forget that Europe remains a net importer. If tensions in the Gulf affect global LNG flows or increase transportation costs, the impact will be felt, but with a delay.
How important is the role of renewable energy in moderating gas prices in Europe at this time?
The role of renewables during this period is very important. In the spring months, wind and hydroelectric power generation – partially supplemented by solar power – significantly reduces the amount of gas needed for electricity production. This reduction has a direct impact on spot gas demand and helps stabilize prices. Consequently, even in a tense regional context, the market reaction is dampened – not because the supply risk disappears, but because the immediate need for gas is lower.
However, we must bear in mind that production from renewable sources is variable and weather-dependent, and large-scale storage capacity remains limited. In the absence of a constant surplus or storage solutions, gas remains the balancing fuel.
How do you think the relationship between oil and natural gas prices will evolve over the next 6-12 months?
The baseline scenario is that the decoupling will persist at least over the coming months: oil prices remain tied to global geopolitical risks and will continue to reflect a premium as long as tensions persist in key regions. Gas, on the other hand, is supported by seasonal factors, inventory levels, and LNG supply. So we have two different price-setting mechanisms that will not align spontaneously.
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