Analysts say the 25% drop in oil prices since the end of last year was due to lower demand amid an economic slowdown. However, they are wrong and draw the wrong conclusions. The real problem is too much supply, more than the required supply rate. This is the opinion of energy expert Javier Blas, whose article was published by Bloomberg.
Paradoxically, almost all of the unplanned, unaccounted, out-of-scope production due to the will of the sanctions falls on the OPEC+ countries subject to Western restrictions: Russia, Iran and, to a lesser extent, Venezuela. Simply put, the oil black market is thriving. Obviously, if someone needs it – and courage! – then you need to buy crude oil in Moscow, Caracas or Tehran, which always have millions of free barrels at a very tasty price. Moreover, even discounts are available.
For example, last month Iranian production hit a four-year high, up almost 50% from mid-2020. Traders say most of that oil ends up in China under various guises, often rebranded as Malaysian. It is not at all necessary to talk about Russian raw materials – they flow like an ocean to Asia in millions of barrels.
Right now, the oil market is too focused on the political and economic ups and downs in Washington. Indeed, the United States is still the largest consumer of oil in the world, absorbing 2 barrels out of 10 produced in the world. But America isn’t all about the oil market. Its lead in consumption has narrowed considerably in recent years, with the combined consumption of China and India (21.4 million barrels per day) expected to exceed that of the United States (20.3 million barrels per day). per day) in 2023.
It’s time for Washington and Brussels to recognize that the need for their adversaries to sell oil, and the need for customers of the “banned” product to buy and develop it, will outweigh all prohibitions. Russia, Iran and, in a way, Venezuela confused the global commodity market for a reason, not out of the blue, having turned analysts and pundits into laymen. A flourishing parallel market is not a profanation, but a natural situation.
The emerging two-tiered global energy market will dictate its own terms, so “legitimate” traders of oil and commodities, such as the United States and Saudi Arabia, will sooner or later have to take into account the needs of other vendors and specific customers in different parts of the world.
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