If you ask most people, even those involved in commodities markets, what is the most political raw material that trades on the futures exchange, I bet most would answer that it is crude oil. More than half the world’s oil reserves are in the Middle East, which is the most politically turbulent region in the world. Crude oil is a ubiquitous raw material that provides energy around the globe.   Meanwhile, over past decades the international oil cartel, OPEC, has attempted to influence prices by controlling the amount of the energy commodity that flows from wells and is available to consumers all over the earth. We have seen examples of how the leading oil producers have banded together to cut back on output or flood the market impacting supplies


  The two crude oil pricing benchmarks around the world are the Brent price and the West Texas Intermediate or WTI price. The two benchmark oil trade in the futures market and attract tremendous hedging, investment, and speculative interest. Brent crude oil is the preferred pricing mechanism for around two-thirds of the world’s crude oil while WTI is the benchmark for the other third. WTI is sweeter crude, meaning it has a lower sulfur level and is more appropriate for gasoline production in the refining process. Brent’s characteristics made it easier and cheaper as an input for the refining of diesel fuels and other distillates. Meanwhile, Brent and WTI are benchmarks, and while oil production all over the world may use them for pricing purposes, there are many discounts and


Oil prices got a modest lift last week on word OPEC may be upping the production cut ante, but gains were balanced by signs of Russian production growth.   A research from PVM (International oil brokers & consultants) suggests delegates at a May meeting of members of the Organization of Petroleum Exporting Countries may consider deeper cuts than already implemented under a six-month deal that began in January.   Libya and Nigeria are exempt from the deal and Iran has room for production growth as it seeks to regain a market share lost to sanctions. Saudi Arabia, the largest producer and de facto head of OPEC, has cut its output more than any other and total group production is already below the 32.5 million barrels per day target.   PVM


  The recent privatization of a 19.5 percent stake in Rosneft has generated substantial media interest with greater details emerging.   The buildup of suspense following the sudden arrest of Russia’s economic minister Ulyukyaev fits well into a game plan involving President Putin, his chief oil boyar Sechin and a number of highly-placed officials and legal and corporate finance experts capable of putting together in ultimate secrecy a complicated deal structure with debatable business content yet high geopolitical and personal value.   The timing of Ulyukyaev’s arrest, just 20 odd days before the formal announcement of the deal, which had taken many months to assemble, relates directly to his stated opposition to the deal. The arrest of Russia’s economic minister by FSB counterintelligence officers also attests that Ulyukyaev posed a


Two months after setting the ball rolling in Algiers and eight years after it last cut output, OPEC agreed this time in Vienna to resume its efforts to prop up oil prices. The group announced cuts of 1.166m barrels a day, effective from the beginning of January, for six months. The deal may be renewed at the end of May.   The vast majority of market participants doubted the ability of the international oil cartel to agree on anything, much less and agreement to cut production. In the days leading up to the November 30 biannual meeting, it began to appear that the framework for a deal discussed in Algeria back in September was falling apart. The Saudis stated that they would not agree to any deal where all members


  As many commentators note, a 1,2 mbpd oil output cut as agreed by OPEC may not be enough to wipe off the surplus of oil at the global markets, let alone the concerns about the discipline of the cartel members in abiding to agreed cuts ( In this regard, announced participation in the cuts by non-OPEC suppliers by 600 kbpd becomes crucial, and all eyes are on Russia in the first place, which is supposed to take the biggest share of the non-OPEC cut (300 kpbd).   Leaving aside the issue of who these “other producing countries” besides Russia will be, and the question of whether they will be willing/capable of cutting output (Kazakhstan had just introduced the giant Kashagan field onstream, Mexico is struggling with oil output decline

This entry was posted in The Region and tagged , , , by Vladimir Milov.

About Vladimir Milov

Vladimir Milov is a Russian opposition politician, publicist, economist & energy expert. Former Deputy Minister of Energy of Russia (2002), adviser to the Minister of Energy (2001-2002), and head of strategy department at the Federal Energy Commission, the natural monopoly regulator (1999-2001). Author of major energy reform concepts, including the concept of market restructuring and unbundling of Gazprom, which was banned from implementation by President Vladimir Putin. Founder and president of the Institute of Energy Policy, a leading independent Russian energy policy think tank (since 2003). Columnist of major Russian political and business editions, including Forbes Russia, frequent commentator on Russian political and economic affairs in major Western media outlets (The New York Times, The Financial Times, The Washington Post, The Economist, etc.). Since leaving Russian Government in 2002, Mr. Milov had became a vocal public critic of Vladimir Putin’s dirigiste and authoritarian course. Mr. Milov is also active in the Russian opposition politics, serving as Chairman of the Democratic Choice opposition party, and is also known as co-author of the critical public report on Vladimir Putin’s Presidential legacy called Putin. The Results, written together with Boris Nemtsov (several editions published since 2008).

  On August 8th, OPEC published a press release stating that H.E. Dr. Mohammed Bin Saleh Al-Sada, Qatar’s Minister of Energy and Industry and current OPEC president, had scheduled an informal meeting of OPEC member countries to take place on the sidelines of the 15th International Energy Forum which will take place in Algeria from 26 to 28 September 2016. This renewed rumors of another production “freeze.” But then prices began to fade until last Thursday, when the Saudi Press Agency reportedly emailed a statement to journalists quoting Saudi Energy Minister Khalid al-Falih as follows: “…We are going to have a ministerial meeting of IEF in Algeria next month, and there is an opportunity for OPEC and major exporting non-OPEC ministers to meet and discuss the market situation, including any