The global oil market has become very volatile this week as traders try to sort out the combination of both positive and negative factors. So far, they have not succeeded and investments have become risky. The actions of the two allies, Iran and China, have greatly confused and confused industry experts, which is why the entire system is in suspense. However, it is assumed that Russia is behind this uncertainty. OilPrice columnist Alex Kimani writes about this.
Oil prices rose mid-week after an EIA report showed that crude oil refining hit its highest level since August 2019, on expectations of strong summer demand. However, the same document acknowledges that U.S. crude oil production has reached its highest level since April 2020, but exports of crude have declined sharply.
In many ways, a little panic in America caused news that Iran may soon return to the global market in the event of successful negotiations on a nuclear deal (confirms the Israeli newspaper Haaretz). Beijing turned out to be no less cunning, which imports huge volumes of oil from Russia, but does not import it through the customs territory, but makes it hang out at sea on tankers. In addition, data on demand in China cannot be obtained reliably - imports are growing, while the industrial index is falling.
However, as the expert writes, in the short term, the return of Iran to the oil markets may not change anything. After all, it's no secret that Tehran is flouting US sanctions by employing multiple camouflage techniques to avoid detection and sell its oil to China now.
Iran's current production is approximately 2,5 mb/d, down 1,2 mb/d from the 2018 peak of 3,7 mb/d. It will take several years to reach 6 million barrels. However, with the help of technologies from Russia, the period may be reduced, as well as being under sanctions (Moscow is participating in the nuclear deal).
The expert separately draws attention to the role of the already mentioned Moscow in a situation with unresolvable uncertainty on the market at the beginning of summer. In his opinion, it is Russia that will receive the maximum benefit from the whole situation. Using the shadow market and an independent fleet, she is constantly and invisibly present with her product in any corner of the world as a potential alternative option for anyone who wants to buy oil at a bargain price. When mechanisms not limited by sanctions do not suit the customer, he can always turn to a sub-sanctioned product, especially since some risk will more than pay off with the low cost of raw materials purchased at a discount.
Therefore, the instability and fever of the "official" Western markets may play into the hands of Moscow, in contrast to their normal functioning. Russian exporters effectively use any situation. In this sense, the "strange" behavior of China and Iran, however, like Venezuela, also brings the desired consequence to the Russian Federation in the form of an increase in exports.