At the end of last week, something happened on European energy markets that had been predicted by analysts for a long time, but nevertheless still not expected by the same markets. As reported by Argus price agency, Russian Urals oil was fixed in northwestern Europe on Friday evening at a price with a record premium from 1994 to Brent of $ 2.35 per barrel.
And, as the same Argus agency notes, “The Urals premium in NWE on Thursday rose by $ 0.4 per barrel compared to the Severomorsky dated grade (the index is calculated by the method based on the prices of five grades of oil: Brent, Forties, Oseberg , Ekofisk and Troll) - up to $ 2.35 per barrel (calculated for shipment in Rotterdam). ” Thus, the premium exceeded the previous maximum set at the end of May: $ 2.3 per barrel.
What would it mean in terms of price dynamics in global markets?
Yes, in fact, especially nothing: the picture is standard for recent weeks, you need to thank the OPEC ++ agreement that has earned and is essentially a cartel, as it was almost nicknamed at the official level: USA, RF, Saudi Arabia, plus the rest significant and not very significant players.
The explanation here is quite simple: according to the same information, for example, of the Argus agency, in July the sea export of Russian Urals oil may decrease by 534 thousand barrels per day (2.12 million tons) compared to June - up to 770 thousand barrels per day day (3.32 million tons). And this will be, by the way, the minimum volume in the history of monitoring the agency since 2002, says Argus. That is why, by the way, the premium on a batch of Russian Urals with standard for markets of 80-100 thousand tons in the Mediterranean has recently remained at the level of $ 2.4 per barrel according to the Mediterranean standard.
In absolute terms, Urals has risen in price in the region by $ 0.52 to $ 43.3 per barrel.
The reasons, in general, are simple and, as they say, absolutely market and transparent: Russia simply scrupulously fulfills its obligations. And to be honest lately, as it turns out, is also beneficial: these are the deals in the field of production and trade in oil and oil products that mankind has learned to conclude. Just quote the agency. “The grade value was supported by information on a decrease in Urals shipments in July by more than 40% due to a decrease in production in Russia under the OPEC + agreement,” the Argus report said.
What is actually happening?
Yes, in general, as predicted by most sane analysts: if the agreement on the OPEC ++ formula (the same plus the US and others) is fulfilled, then exchange prices sooner or later will follow the real expected reductions. And they, these agreements, at the current price level simply cannot fail to be implemented - this is the whole trick of the global oil deal today.
Let's just take a close look at the dynamics of the last weeks: at first, just the other day, oil fell quite sharply, but then - for someone, maybe, “unexpectedly” - won back up no less sharply.
And now, even a North American WTI brand’s barrel exceeds $ 40 per barrel again (while our Urals, we recall, is trading at a premium even to the Mediterranean Brent). The thing is that the economy in the real sector is recovering faster than expected, the real demand for energy is growing - that’s the oil reserves in storage, which many countries managed to provide during the period of mass dumping, have already begun to melt.
And even faster than expected.
And if we take into account the reality of production cuts, which are very closely monitored by the OPEC ++ member countries in this particular case (the “lagging behind”, despite the dynamics that are objectively pleasing to the eye, blame publicly and quite revealingly and, there is no doubt, they will also really reduce production, despite since the price increase is not less objective - it’s beneficial to everyone), you can probably safely say that whatever the apologists of “free markets” may say, the real cartel that is emerging in global oil production is quite an addition to which OPEC countries were added, having formed OPEC +, Russia, and now the United States has joined with the "allies", quite convincingly proves its own effectiveness.
And the price increase for the Russian sulfur grade Urals is also explained not by any special love for our country or undercover deals, but by a very crude technological market reality: the Venezuelan “heavy” oil falling out due to American sanctions needs to be replaced urgently with something.
And now (we already wrote about this), Russian “heavy” oil is sold record-high even in the USA itself: oil refining is so arranged - nothing personal. It is simply somehow naive to even talk about European markets, long and firmly historically honored, including under the Russian Urals.
What does this primarily tell us?
Yes, in general, everything is simple: it turns out that if a roasted rooster pecks as it should, even such publicly non-accepting players in global politics as the Russian Federation and the USA are able to interact smoothly and effectively (what can we say about Saudi Arabia).
And Trump is quite normal, if pressed, he will “call Putin”, after which they will calmly, albeit not publicly (and thank God, as the author of these lines seems), despite all the external rhetoric, they will agree on the production parameters that suit all parameters.
After which, as it turns out, all the necessary administrative and purely economic enforcement mechanisms are sought for market participants - and everything, you will be surprised, works.
And there is, probably, not a single player who at least tried to agree to a certain “convention" to one degree or another.
At least not to comply publicly, we emphasize it again. Even those who “did not have time” to reduce production repent and promise to fulfill everything: it would be stupid - the mechanism very convincingly proves its own effectiveness.
And this works even more reliably and convincingly in this particular case than, for example, the combined military power of both, who secretly guaranteed, as we understand, a new global oil deal by global military-political superpowers.
Why can this not but rejoice?
Yes, everything is simple: if global players, as it turns out, can quite effectively interact, if they squeeze the situation properly, in relatively narrow oil production markets (and oil refining, by the way, these are the premiums for Urals), then there is no doubt in case of serious need, they will be able to agree on much more important issues: for example, issues of global nuclear safety that are extremely exciting for all progressive mankind. And the only thing that, as we understand it, is currently hindering the conclusion of new, quite pragmatic deals, is the domestic political problems of the most “main” global nuclear superpower, because the mechanisms for the implementation of agreements, even economic (despite all sanctions), and even unspoken, like we we can verify with you, including the dynamics of oil prices, they exist.
And they work.
And just in fact: they are quite effective.
Only political will is needed. And that same fried rooster, of course, which happened in the global economy last spring against the backdrop of a collapse in production and a rally in oil prices.
The author’s point of view may not coincide with the position of the publisher.