Muted Response to Russian Fuel Export Announcement
Minneapolis, MN | October 3, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC
The market seemed to shrug off Russia’s threat to cut refined product exports. Thankfully, we already know which signals to watch.
Russia attempted to shake up markets by threatening to cut fuel exports. It isn’t clear that they can accomplish this goal, though some speculate about the country’s motivations.
The immediate reaction was muted. That’s good. The effects won’t be noticeable for weeks or months. So, we can watch flows to see how the market finds balance.
US/CAN, China, and India are good candidates to provide replacement barrels. This might pressure USGC spreads in the US as exports rebound off seasonal lows.
Muted Initial Response to Russian Announcement
It seems like every week we get a headline-grabbing statement from one of the OPEC+ members. This week, Russia claimed the spotlight with claims that it intends to limit diesel and gasoline exports in the coming months. Like every past statement from OPEC+ leadership, this should be taken with a grain of salt. Not only because these announcements have historically failed to live up to the hype, but because the leaders of these countries have demonstrated an uncanny ability to time them to maximize media attention and minimize execution. In this case, the announcement coincides with typical seasonal swings in domestic Russian balances. Additionally, there are operational constraints that have led some to speculate that maintenance issues limit output and others to point out that Russian domestic demand for fuels will dictate the ultimate processing rates, leading to higher exports than suggested. So far, prices seem to be in line with this skepticism. Prompt NYMEX Diesel ended the week down 2%, and ICE Gasoil was down 1%.
*This summary is based off September 24, 2023
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Meet the Author!
Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.
He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.
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