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Russia Benefiting from Oil Market Turmoil An interesting couple of posts from Southfront.org this week gives us some insight as to what’s happening in international oil markets. Demand for Russian Urals grade oil is so strong that is has been trading at a pretty steep premium to Brent Crude this month. Southfront references this report from Argus research.
Traditionally, Urals trades at a discount to Brent because of a lack of a unified benchmark price for it. The July Shanghai Crude Oil futures contract closed at ¥299 (or $42.30) per barrel this week, putting it at a ~$1.70 premium to Brent Crude. Russian Urals is far closer to the Medium Sour oil the Shanghai contract represents than the Light Sweet Brent. At the same time the Saudi Arabian plan to flood the market with oil to gain market share has failed entirely.
They shipped out 50% more oil and revenues plunged by 65%. They practically gave the stuff away in April. They had to. With the Riyal tied to the dollar they had to undercut Russian oil which trades in freely-floated rubles. In March and April the ruble spiked to a high of RUB81.66 per dollar and has steadily fallen since then. Today it is still trading around 5% weaker against the U.S. dollar than it was pre-crisis. That then becomes an even bigger source of profit given that now Urals grade is trading at a premium to Brent Crude while U.S. exports continue to lag behind. And the Saudis are now still price takers rather than price makers since they immediately had to go back and adhere to production cuts in like with the rest of OPEC+’s agreement. This dynamic highlights a couple of interesting points:
I’ve been steadfast in my assessment that Russia holds all the cards in the global oil market at this point. This position will only strengthen as long as oil prices stay in this price range. And don’t think Iran isn’t okay with this pricing regime since it thoroughly undermines the Saudis, which, in turn, exposes Israel’s soft underbelly. Iran is using the turmoil in the U.S. to, effectively, smuggle oil around the world, including to China. * * * Join My Patreon if you want help navigating the untold stories in the markets. Install the Brave Browser to loosen Google’s grip on the flow of information.
Tom Luongo is Publisher of the Gold Goats n Guns. Ruminations on Geopolitics, Markets and Goats. Support for Gold Goats ‘n Guns can happen in a variety of ways if you are so inclined. From Patreon to Paypal or soon SubscribeStar or by your browsing habits through the Brave browser where you can tip your favorite websites (like this one) for the work they provide.
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