Crucial factors for oil prices in late 2015 - early 2016


The strategy of Saudis succeeded in transforming the trends and a climate of the global oil market. At the end of the week the oil prices were going down amid solid USD, which has restored hope for hiking interest rates by the Federal Reserve this December. WTI fell to $40, Brent – to $44 per barrel. However, in the long perspective, Saudi Arabia will gain an advantage, because the kingdom uses every chance to get a new share of the market, spreading cheap oil all over the globe. The oil princes just “make the market an offer it can't refuse”. But another type of oil is going to flood the market soon, the Iranian one.

Four crucial factors rule the current trend in the oil markets.

1)     OPEK and Saudis conquer East-Central Europe. Former pro-communist states turned away from Russian oil to the petrol from the kingdom. Poland was proud to declare its “undermining Russia’s traditional dominance as Poland’s crude supplier,” PKN Orlen SA CEO Jacek Krawiec explained. Some other countries of the region are feeling keenly to weaken ties with Russian companies. Thus East-Central Europe share of the oil market is shifting to the Middle East supplies. Nevertheless, the battle between Russians and Saudis for the market is not over yet. In July 2015 Saudis have shipped to Europe 780,000 barrels a day, Russia has shipped more than twice; already in October Rosneft CEO Igor Sechin complained about “untrustworthy Saudis”. The price for contracts is still a subject to negotiate.  

2)    Russians are fighting hard for their markets. Russia always behaves herself like a profit-from-crude-oil-addicted. Every petrodollar is to be counted in the state shoestring budget, do not even mention the “petroprofit” of Russian powers that be. For Russian as well as for Saudis, Asian markets matters more, than European ones, but ex-Soviets used to consider East-Central Europe as their barony forever. Putin again has appeared in the focus of the media after he had interfered the Syrian conflict in the interest of the president Assad. The consequences for Russia showed up almost immediately: (a) Saudis intensified their intrusion in the European oil market; (b) ISIS blew up the jet, killing 224 Russian people. In response Russians is strengthening an alliance with Iranians they have made almost two years ago. From now on the purpose of the alliance is to enlarge collaboration in fighting ISIS, trading weapons and also in surviving on the oil markets. In April 2015 Moscow has confirmed oil-for-good swaps with Tehran, in early November the states signed up the agreement to supply C-300 anti-aircraft missile system to Iran. The unpredictable leaders shook hands. Looks like Moscow believes that Iran will take into consideration Russian interests on commodity markets. Russia shows no intention to decline oil production and supply. Extremely dangerous peculiarities characterize the leadership of the country: uncertain, aggressive, armed cap-a-pie, coward and narrow-minded.

3)     Iran prepares to get its markets back with no merci. The south of Europe waits for Iranian oil. Hellenic Petroleum SA is working out a plan to initiate a dialogue with Iran’s national oil company. According to the company’s capacity, Iranian Oil Minister Bijan Namdar Zanganeh will get a possibility to sell 341,000 barrels a day to Greece. Cia Espanola de Petroleos SAU champs at the bit until the lifting of the anti-Iranian sanctions. Iranians are aware of another potential bargain for 520,000 barrels a day. Certainly, Iran will be back on the market, because Bijan Zanganeh promised to trade the oil almost for a song. The Iran impacts the market as a powerful Machiavellian vizier, armed with western technologies in couple with eastern craftiness.

4)    U.S. high tech oil reacts at the market following the strategy of its own. The US crude inventories keep the highest level for the 80 years, while the rigs have been idled and continue to be closed every week this autumn. The White House rejected the joint project to build a gigantic tube Keystone XL from Canadian Alberta to Texas. Oil terminals and refineries in Cushing are satisfied with the volume and have no interest to gulp more. So U.S. producers do not purpose to change its share of the market or to collaborate with the closest neighbor. They will survive $20 a barrel, if needed. America earned a lot thanks to high technology, however high tech in the oil industry costs a lot. Therefore, meanwhile Washington preferred to pay for cheap oil in dollars, than to spend money and gut bowels of the earth of their own. They are out of the battle in white clothes holding the purse strings.

Thus we will witness an interaction of the factors soon.