The oil patch is abuzz with rumor and speculation concerning the April 17 meeting of OPEC and non-OPEC oil-producing nations in Doha, Qatar.
Oil prices have been swinging up and down seemingly without reason. This volatility will continue in the short term, but the foundation for long-term price stabilization is being laid behind the scenes.
U.S. crude inventories are sitting at record highs of around 2.05 billion barrels right now.
That’s not a surprise. After all, there’s a lingering global crude glut.
The energy sector’s top three objectives are admittedly essential for both economic development and acceptable human life.
Just one thing is clearly on the minds of every money kingpin in London… the current “breakout” in oil prices.
After a hefty rise of 46.9% for the month through close last Friday, WTI crude fell for two consecutive sessions to start the week.
As always, pundits with no real experience in the industry will blame the “glut” – but excess supply on its own is not responsible for today’s oil conundrum.
There’s a lot of conversation about the energy sector’s accelerating debt crisis. The bottom line is simply this.
Regardless of where the crude oil price moves from here, there is little likelihood that any rise in the level will be large (or happen soon) enough to save most companies mired in a vicious cycle of ever more debt.
The “other shoe” is dropping for the oil sector, and it’s going to affect each and every one of us.
This ripple effect will extend to much more than just oil and gas.
Last week, Russian Energy Minister Alexander Novak claimed that Saudi Arabia had proposed a 5% cut in oil production.
That set the oil price roller coaster off and running, with crude prices shooting up to levels not seen in a month.
There is only one problem.
The Russian financial situation is heading south again – and fast.
Crude oil prices of less than $30 a barrel are bad enough, but Russia can’t even fetch that. The country’s “sour” high-sulfur export blend, Urals Export Blend Crude (UEBC), is trading at $26 a barrel – or less. Natural gas is faring even worse.
The fact is, Russia is dependent on oil and natural gas exports to buoy its unwieldy central budget. So the world’s largest country is in trouble, and serious trouble if it can’t find a way out.
There is a way out, though there’s only one option, and it’s far from certain whether Putin can make it happen.
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