Russia Gains Upper Hand In Asian Oil War

The Saudi-led OPEC cuts may have supported oil prices and reduced market volatility, but they have also opened the door wide to rival crude grades flowing into the most prized market for the Middle Eastern producers: Asia.

Reduced supplies by OPEC resulted in higher prices for Middle Eastern crude benchmark Dubai and a narrower Brent/Dubai spread, which made the shipment of Brent-price-linked crude grades to Asia profitable. Continue reading

Shale Drilling Set To Take Off In Argentina

The economy in Argentina is best described as a “pendulum”, going from loose economic policies in the ‘80s to Washington-consensus liberalisation in the ‘90s and back again under the Kirchner regime. Since the current president Macri took office in December 2015, he has been reversing the policies of his predecessor and has focused on boosting the economy with free-market measures through eliminating currency controls and lowering utility subsidies. In March, the government also announced a US$7.50 per barrel subsidy on exported oil while Brent remained below US$47.50 per barrel to attract foreign investment. Continue reading

China intends to oust dollar from oil trade

China is planning to launch its own oil benchmark in October, similar to Brent and WTI, striving for a more important role in establishing crude prices. Unlike the Western benchmarks, the Chinese contracts will be nominated in the yuan, not the US dollar.

Shanghai International Energy Exchange sent a draft futures contract to market players in August, Reuters reported quoting sources. Continue reading

OPEC Boasts About Pain In U.S. Shale

Oil prices continue to fluctuate in a relatively narrow band around $50 for WTI and $60 for Brent. On March 6, Baker Hughes reported another round of declining rig counts. Only this week the pace of cutbacks accelerated. An estimated 75 rigs were removed from the oil patch for the week ending on March 6, a big jump from a week earlier. It is important to remember that week-to-week numbers are largely statistical noise; the long-term trend line is more important. Still, after several weeks in which the rig count collapse appeared to be slowing, last week’s figures are a reminder that the rout is not over yet. After all, production has not dropped off – U.S. production surpassed 9.3 million barrels of oil per day in February, the highest level in decades. Continue reading

Russia Abandons PetroDollar By Opening Reserve Fund

2015 has not been good to Russia; the spread between Brent and WTI is gone in anticipation of US exports and both benchmarks have flirted with sub $45 prices. A hostage to such prices, the ruble has yet to begin its turnaround and the state’s finances are in extreme disarray. President Vladimir Putin’s approval ratings remain sky-high, but his country has not faced such difficult times since he took office more than 15 years ago.

Since the turn of the new year the ruble has fallen over 13 percent and Russia’s central bank and finance department are running out of options – to date, policy makers have hiked interest rates to their highest level since the 1998 Russian financial crisis and embarked on a 1 trillion-ruble ($15 billion) bank recapitalization plan to little effect. Their latest, and most dramatic, plan is to abandon the dollar – at least somewhat. Continue reading

US Sees Huge Energy Opportunity In Europe

If 2015 is anything like 2014 we can expect a wild ride. Oil price volatility – including its downward trend – will linger well into the first and second quarters as global production persists and key conflicts in Eastern Europe and the Middle East show no end. For its part, the United States is better positioned than most – the US is poised to carry the global economy in 2015 with projected GDP growth of 3.1 percent. However, converting this potential into meaningful energy trade and/or soft power is another matter altogether and 2015 offers limited opportunities. Continue reading