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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Why Russia Is A Greater Threat To Oil Prices Than OPEC

There’s been a lot of press lately about OPEC’s effect on oil prices. With many observers wondering if surging crude exports from places like Saudi Arabia and Iran will hold back prices for the indefinite future.

But at the same time, there’s another, less-discussed oil exporting nation having a potentially bigger effect on the market. With shipments here recently surging to record levels.

Russia.

Data released earlier this week from Russia’s energy ministry showed that crude exports to the end of June rose 4.9 percent as compared to same period of 2015 — hitting 5.55 million barrels per day. Exports for the month of June were up 1.14 percent year-on-year, with Russia’s shipments now having increased during every month since July 2014.

That two-year surge in exports looks ready to make 2016 a banner year for Russia’s oil shipments abroad. At current rates, exports would hit a record this year — passing the old yearly high of 253.9 million tons (1.8 billion barrels) set in 2007.

In fact, it looks like exports in 2016 could be significantly higher than that level. Showing that Russia is going all out in selling crude to foreign buyers. Related: Morgan Stanley Warns That Rising Rig Count Could Undo The Rally

A big part of the reason is Russia’s desire to compete with OPEC. With Russia’s benchmark Urals blend crude being similar to oil produced by Iran — prompting Russian producers to sell more in order to hold market share, at the same time as Iran is ramping up sales globally.

The competition between these two nations is unlikely to reduce anytime soon. Meaning there’s going to be a lot of supply coming from several places around the planet — with potential dampening effects on prices.

One x-factor on the Russian side is taxes. Which right now favor the production and export of crude oil over refined products. If policies change however, Russia’s surging exports could take a hit — watch to see what moves, if any, the government makes in this area.

Here’s to going all out

By Dave Forest

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Leave a comment
  • andrey on July 08 2016 said:
    RF truly needs these tax money to cover it's budget deficit in the constantly contracting economy. It also consumes less oil in the current economic environment and will consume even less, so more seems to be left available to export. Though it'll not necessarily extract more because of existing reserves depletion and limitation on technology import that world projected on RF for the bloodbath that those putinoids ignited in Ukraine. So there is a good chance that price will stay low for a while and then get even lower.
  • Ed on July 08 2016 said:
    While I have sympathy for the pumped up field workers, you charlatan wall street fat but crooks have fat enough wallets too but you're own. This down turn will continue. Fossil fuel is as done as the dinosaurs. You manipulating lazy money changers will of course find some other industrious hard workers to increase your wealth off of no doubt, but, sleep with this, the few people who made your wealth,,consumer's, and oilfield workers, some never had homes and now many in the working end of yours will lose there's, these are young vulnerable families with children and crushed self esteem.

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