RE: Short term hit11 Apr 2022 16:13
I can't say that I wholly agree in relation to even the short term hit on Shell. There is a supply shortage and releasing oil from the US Strategic Reserve is unlikely to have much impact, it just shows willing.
The costs associated with pulling out of Russia are significant, and might even be exaggerated to win brownie points with the UK/EU Governments, but will easily be swallowed up by the mighty cash-flow bonanza.
The release from the US strategic Reserve has to be taken in context. If released at 1 m bpd x180 days - this will be done so in the context of the World using 97-100 m bpd. I think I read that the US has a total of something a little over 600 million barrels - I don't think that we mortals get to know the exact size of the Strategic Reserve, otherwise "Strategic" would have to be dropped from the descriptor. For me it is a bit of a window dressing measure & also once it's gone it's gone! What happens then - the US may be buying back at higher prices.
I think more significant influences on the oil supply and price will be threats like Russia offering steep discounts, as it has evidently offered a $35 a barrel discount to India. Also the rush of Western governments to reduce reliance on Russian oil and gas. Everyone seems to agree that there were serious supply issues pre the Ukraine situation, and this will absorb itself into the question of what is Russia going to do next:
Russia accounts for about 10 percent of global petroleum production. Its crude production exceeds 10 m bpd. It is also a major exporter to world markets, exporting about 5 m bpd of crude oil and close to 3 m bpd of petroleum products. It will not do any stabilising wonders for the World oil price if this is largely removed from World markets. It could sell at bargain prices, financially undermine the markets themselves, storing it in quantity is a non-starter, sell into "new" markets, sell it to middlemen in say Europe as it does now at very low prices, but instead of the middlemen selling on at market prices, say selling on at bargain prices again undermining the oil price and markets.
I also think quite a lot of skulduggery will take place, because it must be very difficult to put a stamp of origin on something as slippery as oil, particularly if it is blended and mixed as it passes through several hands to the end customer!
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