The atrocities committed by Russia in Ukraine can no longer be ignored. Despite Europe’s dependence on Russia for oil and gas, the world can no longer do business with Russia, led by Russian President and resident madman Vladimir Putin.
BP (NYSE:BP), Total (NYSE:TTE), Equinor (NYSE:EQNR), Exxon Mobil (NYSE:XOM), and Shell (LON:RDSa), along with other companies, are curtailing business to one extent that will negatively impact the future supply of Russian oil and gas.
Even Canadian Prime Minister Justin Trudeau announces a ban on Russian oil imports even though Canada has not bought any oil from Russia in years. What a guy. Ukraine Foreign Minister Dmytro Kuleba launched a scathing attack on firms still doing business with Russia, saying that some major oil companies could find themselves on the wrong side of history.
“The world will judge them accordingly. And history will judge them accordingly”.
This is also a wake-up call to the importance of all forms of energy in terms of global stability. The world must throw out the Paris Climate accord and go back to the drawing board with realistic proposals for an energy transition.
An energy transition based on the reality that fossil fuels will be with us for years and quit risking our lives, our liberty, and fortunes on technologies that do not yet exist. Europe took that path, becoming more dependent and beholden on Russia, and now the brave people of Ukraine and the rest of the world are paying the price.
Germany is now changing course not only by supplying weapons to Ukraine and now by embracing all forms of energy. Germany will support the construction of two LNG import terminals and is not leaving any energy source – not even coal or nuclear – off the table as it will now look to cut energy dependence on one supplier, Russia. All it took was the threat of a world war to get the message through.
Not only are oil traders praying for the people of Ukraine, but they will also watch today the OPEC Joint Technical Committee to see if OPEC is inclined to raise output. They know that whatever happens, Russia’s supplies are going to be at least somewhat impaired, or will the group just stand pat because their favorite co-conspirator is Russia. Oil traders also must watch to see if world powers push through a new Iran nuclear deal and lift sanctions on the rogue nation. There’s nothing like switching your oil dependence from that madman in Russia to the madman in Iran.
If you were wondering where Iran is coming down on this Russian war of aggression, the Iranian foreign minister said:
“Iran supports ending the war in Ukraine. We want the war to be ended there, but the solution to any crisis is only possible if the root cause is identified. The root of the crisis in Ukraine is the US policies that create a crisis, and Ukraine is a victim of these policies.”
Oh yeah, those are the guys you want to buy oil from and lift sanctions on. Biden sure wants to. He would rather buy oil from Iran in the name of stopping them from getting a nuclear weapon.
As his Press Secretary Jen Psaki might say:
“That is a misdiagnosis of the problem.”
The underestimating of the risk by guys like Vladimir Putin and hardline Iranian President Ebrahim Raisi is the real risk to global security.
And Besides, China is importing record amounts of oil from China under President Biden. Reuters reports that China’s purchases of Iranian oil had risen to record levels in recent months, exceeding a 2017 peak when the trade was not subject to U.S. sanctions, tanker tracking data showed. The ramping up of the purchases by the world’s top oil importer comes amid talks between Tehran and world powers to revive a 2015 nuclear deal that will lift U.S. sanctions on Iranian oil exports. The talks have intensified in recent weeks.”
Oil traders are also prepared for a global SPR release. We know it is coming; it is just a matter of when and it will only have a short-term impact on price.
The Biden administration must loath the U.S. oil worker and oil companies because he props up regimes like Russia and OPEC instead of U.S. oil and gas. Yet Biden still fails to look to the U.S. oil industry and the American worker for help. Union workers are great unless you’re a union worker in U.S. oil and gas. Then you do not matter.
Bloomberg reports that Devon Energy Corp (NYSE:DVN). CEO Rick Muncrief has a message for President Joe Biden: He’d be happy to discuss the possibility of boosting oil output to help contain the surge in gasoline prices and inflation. But, he says, no one in the administration has reached out to him to discuss the matter at any point, something he finds puzzling as he watches Biden personally lobby OPEC to raise production.
“I’m a little mystified that there hasn’t been some dialog,”
Muncrief said in an interview in New York. A request from the Biden team, he said, could make it easier for companies like Devon, one of the biggest explorers in the U.S., to boost output without angering shareholders who have been demanding investment discipline.
“If they were to reach out and maybe be a little more collaborative, it might provide some cover.”
Natural gas looks like it has hit a short-term bottom. The U.S. is going to expand its business with Germany for natural gas in the future.
Oil prices are on a tear. Global supplies are the tightest they have been in years, and unless we get a recession, the trajectory of oil and gas continues to be markedly higher. We hope you are hedged for upside risk.