The Russian economy (catch all)

[Dayuhan]

PS to above:

Outlaw, I still think you're wildly overrating the importance of categorizing Russian oil as "sour". Urals is in fact a medium sour blend with API gravity of around 31.2 and sulfur content of 1.35%. That's comparable to Arab Light and other major blends and is pretty much within the operating range of most major refineries. As a distinction it doesn't really matter much. It won't price as high as the very light sweet product, but it's not dedicated to specific markets either.

This is quite different from, say, the extremely heavy and extremely sour product that dominates Venezuelan exports, which really does require specialized refining and transport. Fortunately for the US, Canada produces a very similar product from its tar sands, so US refineries designed specifically for Venezuelan oil have been able to use Canadian product. That of course is a problem for Venezuela, as their crude cannot just slot in anywhere.

Again, it's likely that oil prices will be below $100 for the medium term future, and this will put some hurt on the Russians. Whether or not that's going to affect their decision making process in the Ukraine is another question altogether.

[Dayuhan]

Some clips from the oil price discussion...

http://www.bloomberg.com/news/2014-0...d-in-aug-.html

Saudi Arabia will reduce by about 500,000 barrels a day in the fourth quarter and will make further decreases if prices slip further, Bloomberg oil strategist Julian Lee said today...

Crude prices should rebound above $100 in the next few months as Chinese demand rises, Nawal al-Fezaia, Kuwait’s governor to OPEC, told reporters in Kuwait today.

There’s no need for OPEC to cut output because prices will recover once demand for winter fuel increases, Thamir Al-Ghadhban, senior adviser to the Iraqi government and a former oil minister, said in a phone interview on Sept. 8.

OPEC ministers kept their output target unchanged at 30 million barrels a day on June 11 in Vienna. The group is scheduled to meet next on Nov. 27. Iranian Oil Minister Bijan Zanganeh said there’s no need for an emergency meeting, according to comments cited by state-run news agency Mehr today.

The group will probably refrain from making cuts unless crude falls below $90 a barrel, according to JBC Energy GmBH, a Vienna-based consultancy. Saudi Arabia may have “become a little more relaxed” about prices trading under $100 for a few months, JBC said in an e-mailed report today.

Obviously nobody knows for sure what will happen, but I wouldn't say there's a consensus on a long term price drop. It is true that NE Asian winter buying will become a factor in Oct, hard to say what impact that will have. Also hard to know how much the Saudis are willing to cut, what decision OPEC will make in Nov (or what the pricing environment will be in Nov), how Libyan and Iraqi production will hold up, etc. Lots of variables out there.

It's wort noting that when a country talks about the price needed to balance a budget, they are talking about the average price for that budget year, not the daily price. The average for 2014 is still well over $100, and it would take some time to skew that average down. A month or so in the $90 range would not do all that much damage. We'll see how far it falls and for how long.

Again, though, it's hard to see how any of this is likely to impact Russian decision making in the Ukraine.