LONDON (Realist English). Global energy markets are showing mixed dynamics amid news of a ceasefire between Israel and Lebanon. Oil prices are correcting after three days of gains, while the gas market is frozen in anticipation of further developments.
The geopolitical risk premium remains high, and markets are in a fragile balance between hope for diplomacy and fear of an expanding conflict.
Correction After Three Days of Growth
At the close of trading in New York and London, solid positive dynamics were recorded. Quotes rose for the third consecutive day amid concerns over the Strait of Hormuz and data on declining US inventories:
- WTI (July) on NYMEX: $96.02/barrel (+2.41%, +$2.26)
- Brent (August) on ICE: $97.81/barrel (+1.89%, +$1.81)
Morning indicators on June 4:
At the open, the market turned downward. The reason was reports of the start of ceasefire negotiations between Israel and Lebanon, which reduced speculative pressure:
- Brent — around $96.9 – $97.1/barrel (down 0.7–0.9%)
- WTI — around $95.2/barrel (down 0.6–0.8%)
The spread between Brent and WTI remains narrow — about $1.7/barrel. This signals that the market still perceives the escalation as manageable and does not expect an acute supply shortage in the short term.
Technical picture:
The key resistance level at $100/barrel remains intact. At the beginning of June, the market unsuccessfully tried to break through it. The expected trading range for the day: WTI — $90–100/barrel, Brent — $92–102/barrel. To break the $100 mark, new drivers are needed — a worsening situation in the Strait of Hormuz or the collapse of US-Iran negotiations.
Natural Gas Market
- European gas (TTF) fell about 1% from the previous day’s close and is fluctuating around €48.6 per MWh. The day before, it had risen more than 3%. At the same time, the overall monthly dynamics remain steadily positive (+4.61% over 30 days).
- US gas (Henry Hub) — $2.9–3.0 per MMBtu. The US market remains isolated from the European turmoil thanks to its own resource base.
- Asian gas (JKM) is holding steady with a premium to European gas, providing arbitrage for US suppliers.
Key Factors Influencing the Market on June 4
1. Middle East Ceasefire — Trigger for Correction
On June 3, a ceasefire agreement between Israel and Lebanon was officially announced. The deal, brokered by the United States, provides for the creation of demilitarized zones in southern Lebanon under the control of the Lebanese army.
The truce temporarily removes the risk of Hezbollah (and through it, Iran) being drawn into a full-scale war. However, the group’s reaction is still unknown: it did not participate in the negotiations, and its response could be anything.
2. Oil Stuck in the “$100 Lock”
The psychological barrier of $100/barrel remains insurmountable for now. Even positive news about falling US inventories failed to push the market above this level. Participants are cautious, fearing profit-taking at any sign of diplomatic progress.
3. Demand Revision and Structural Changes
- OPEC+: At its May 7 meeting, a decision was made to increase quotas for June by 188,000 barrels per day. However, Russian Deputy Prime Minister Alexander Novak explained that many countries cannot increase production due to the conflict, so the quota increase is offset by reduced production in Iran and logistical problems.
- US Inventories: EIA data showed a sharp decline in commercial inventories, and spare storage capacity is rapidly shrinking. This signals a physical deficit in the US market, which is quietly pushing prices higher.
- China: According to IEA reports, the pace of oil demand growth in China is slowing. The expected increase for 2026 is estimated at only 190,000 barrels per day, which is holding back bullish sentiment.
4. The Ukraine Factor
Drone attacks on Russian refineries continue. As of early June, an estimated 15% to 40% of Russian refining capacity has been taken offline. This continues to affect global refined product prices, creating a shortage of high-quality fuel.
5. Strategic Shifts
- Gulf countries (Saudi Arabia, UAE, Iraq) are investing billions in expanding overland pipeline infrastructure to reduce dependence on the Strait of Hormuz. Saudi Arabia is already pumping 7 million barrels per day through the East-West pipeline.
- Iraq intends to triple crude oil flows through pipelines bypassing the strait — to 770,000 barrels per day.
- The transit of Russian gas through Ukrainian territory has completely ceased since the end of May, finally redrawing the supply map for Europe.
Conclusions
The oil market is frozen at a crossroads. Market participants realize that without a real ceasefire and tangible progress in US-Iran negotiations, the “risk premium” will remain priced at $90–95/barrel. The Middle East factor still outweighs weak signals from the macroeconomy and Chinese demand.
The immediate focus is on the development of the ceasefire situation in Lebanon. If it holds for several days, the market may try to test the lower end of the range ($90–92 for Brent).
Logistical problems in the Persian Gulf and the depletion of US inventories continue to support prices. A move above $100 without a new geopolitical shock remains unlikely in the near term.