Two Oil Price Scenarios: One Bad, And One Catastrophic
Another day, another record discount for Russian Urals crude, which was offered at a price more than $22 below spot by oil trader Trafigura and still could find no giant…
… confirmed what we previously observed, namely that the commodity world is splitting in two: a bidless market for Russian oil, and (increasingly) offerless for non-Russian.
This is the key point that JPMorgan’s commodity strategist Natasha Kaneva makes in a research note earlier today, in which she notes that while the US and its allies have so far stopped short of imposing penalties directly on Russian oil and gas, on Tuesday it became increasingly clear that Russian oil is being ostracized. The preliminary Russian crude oil loadings for March revealed a 1 mbd drop in the loadings from the Black Sea ports, 1 mbd drop from the Baltics and 0.5 mbd drop in the Far East.
In addition, there is now also an estimated 2.5 mbd loss in oil products loadings from the Black Sea, for a total loss of 4.5 mbd of Russian crude loands, a stunning amount in a market that was already precariously balanced before the Ukraine war.
Putting that number in context, prior to last week Russia was exporting about 6.5 mbd of oil and oil products, with two-thirds clearing through the now-frozen seaborne market. Out of that, Europe and the US accounted for 4.3 mbd, with Asia and Belarus rounding to 2.2 mbd.
Then echoing what we said yesterday, JPM notes that “as the Russian invasion entered its seventh day on Wednesday, Russian cargoes have become toxic for the majority of the Western trading houses, refineries, utilities, shippers, banks, ports and insurers. As of today, almost 70% of Russian oil is struggling to find buyers.”
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