There's been a lot of uncertainty in global crude markets the last several weeks.
On the one hand, we've seen supply gradually coming back online in places like Libya. On the other, significant output has been threatened by growing violence in Iraq.
The supply worries caused West Texas Intermediate front-month futures prices to rise as high as $107 per barrel in June. Their highest level since September 2013. But then moderate, having this week fallen back to near $103.
But now we can add one more wrinkle to this mix: Russia.
Reports this week from Russian Energy Ministry division CDU-TEK show that this petro-power is seeing a drop in crude exports.
For the six months to June 30, Russia's oil shipments abroad fell 5.3%, to 4.95 million barrels. Interestingly, Bloomberg notes that this is the lowest level of exports seen since 2008, when tracking of the data began.
This is potentially a critical event for oil traders. Pointing to a supply decrease on the order of hundreds of thousands of barrels. Enough to cause a tightening in markets like Europe and Asia, where Russia is a key supplier.
What's less clear however, is whether Russia's export dip is here to stay.
The decrease in crude shipments appears to be due to rising domestic production of fuel oil. With output of this commodity rising 5.8% in the January to May 2014 period--hitting a five-year high.
That obviously means a lot more crude being refined in-country. But that's not necessarily something the Russian government wants.
That's because fuel oil is a low-value product. Mainly produced by small, aging refineries.
Russian regulators have in fact been trying to discourage fuel oil production across the country. By raising export taxes on the product--a move that's reportedly set to continue.
The end goal is that export of low-value fuel oil should become uneconomic. Forcing refiners to upgrade their plants in order to produce more-desireable products like diesel and jet fuel.
We'll see how quickly that change comes. And if internal crude consumption continues to rise in the meantime. If the shift takes time, this trend could become a dark horse in supporting global oil prices.
Here's to keeping the crude at home,
By Dave Forest