• Saudis’ market logic.
• IEA says Q4 tight. Russia oil-price-cap impact

EuroNews – Serbia

BELGRADE
EnergiesNet.com 09 27 2023

Today 09 26 2023, (12:16 CET), EuroNews-Serbia interviewed me on the rising oil price.
I explained:

• Saudi logic for cutting, with Russia, about 125 million barrels from the market so far, and by the end of 2023 some 245 million barrels [1] is its prediction of soft demand due to China’s slow recovery and somewhat the EU too; plus the Saudi minister points to central banks continuing to fight inflation with high rates.
  
• However, the IEA disagrees, seeing a shortage of supply in Q4. I added that the market is in backwardian, and so agrees with IEA.
  
• My assessment:
  
  • Price over $100 is likely this year; it is after all fairly close now, in the 90’s.
    
    
  • I answered a question about who gets hurt the most from high prices.
    
  • It is the countries who do not produce oil and are relatively poor. So, mainly some states in Asia and So. Asia, Africa and Latin America.
    
  • As for Europe, rising oil price will be somewhat inflationary; especially hitting Eastern Europe, where inflation is generally still a greater problem.
    
  • However, I pointed out that compared to historical peaks in 2008-09 and 2010-11, $100 or even $125/bbl or even higher prices are needed to begin approaching the REAL price of oil back in those cases.
    
  • So, $100 oil is now not so inflationary as it was back then (and in general oil is not as inflationary as it was in the last century, because economies have larger service and knowledge sectors that are not as strongly affected by fuel prices as manufacturing and chemical industries.
    
  • I also explained that the Russian oil price cap sanctions have actually “put money in the pockets” of people in poorer states, as its enforcement meant that Russia, while still selling its oil, has been forced to sell it cheaper.
    
  • However, as a higher percentage of its oil (about 75% now) is sold via tankers that are not owned or insured by the EU or UK , it can be sold at higher prices without falling under the price cap enforcement mechanism. This higher price is, then, also now contributing to the higher price of oil on the global market. [2]
    
  • In particular, up till the start of last month (start of Sept), Russia was losing about half the revenues it would have ordinarily made on its oil exports. (This can be seen on a chart recently released by the USA Treasury Department. [3])

References:

• [1] “Saudi oil minister deflects blame for rising prices: John Kemp,” Reuters News, 19 Sep 2023.
  
  
• [2] “Russia dodges G7 price cap sanctions on most of its oil exports,” Chris Cook and David Sheppard in London, 24 Sep 2023. See charts at: https://www.ft.com/content/cad37c16-9cbd-473c-aa2f-102c21393d2e
  
  
• [3] “FEATURED STORIES: The Price Cap on Russian Oil: A Progress Report,” May 18, 2023, Elizabeth Rosenberg, Assist Secretary…; & Eric Van Nostrand, Acting Assistant Secretary …. U.S. Depart. of the Treasury. See Chart at https://lnkd.in/ekdHJYPW .
  
• euronews

globalbarrel.com 09 26 2023