The oil market is selling off on comments about peace and ceasefire, but the truth is that whether or not peace is achieved, Europe is still addicted to Russian oil and gas, says Phil Flynn of the PRICE Futures Group.

France 24 reported that Ukraine is willing to become neutral and compromise over the status of the eastern Donbas region as part of a peace deal, President Volodymyr Zelensky said on Sunday, after a Ukrainian negotiator said the next round of face-to-face talks with Russia would be held in Turkey on March 28-30.

Crude Oil (CL=F) is selling off on optimism there will be some resolution but that remains to be seen. Still, deal or no deal, Europe is still dependent on Russia’s oil and gas.

The energy minister H.E. Suhail Mohamed Al Mazrouei stated the obvious by saying that, “Russia is an important member, (of OPEC Plus) and leaving the politics aside, this volume is needed today. Unless someone is willing to bring 10mn barrels a day to the table we don’t see how one can substitute Russia.

Also, reports that Yemen’s Houthi rebels announced a three-day truce with Saudi Arabia with the possibility of a permanent cease-fire, led to some speculate that the Iranians led the group. Is doing this to smooth the way ahead for the Iranian nuclear talks?

Oil is also down on reports of more Covid lockdowns in China. The report said China’s biggest city Shanghai is shutting down even after authorities said that they wouldn’t shut down last week. This is adding to downward pressure as well.

Bloomberg reports that Russian tankers carrying oil, chemicals, and oil products are increasingly concealing their movements, a phenomenon that some maritime experts warn could signal attempts to evade unprecedented sanctions prompted by the invasion of Ukraine. In the week ended March 25, there were at least 33 occurrences of so-called “dark activity”—operating while onboard systems to transmit their locations are turned off—by Russian tankers, said Windward Ltd., an Israeli consultancy that specializes in maritime risk using artificial intelligence and satellite imagery. That’s more than double the weekly average of 14 in the past year.

The dark operations occurred mainly in or around Russia’s exclusive economic zone, according to Windward, which conducted the research at Bloomberg’s request. The ships engaging in dark activity include vessels connected to big corporations and multinational shipping firms, as well as small businesses, according to Windward. Commercial vessels are required by international maritime law to have their automatic identification system, or AIS, turned on while at sea. Disabling or manipulating a ship’s identification system is at the top of deceptive shipping practices cited by the US Treasury Department in an advisory last May to curb illicit shipping and sanctions evasions.

The selloff in the oil market is creating a risk-off atmosphere. Still, we believe that there is an upside risk on oil and this is probably a much-needed correction to use the break to put on hedges.

Natural gas is getting a boost from talk of more LNG exports in the future. We like the natural gas options going forward.

Learn more about Phil Flynn by visiting Price Futures Group.