Oil markets continue to experience high volatility as the Middle East conflict escalates, oil prices fell to the north on Wednesday, shortly after US President Donald Trump signaled that the war in the Middle East is almost over. In his comments a few days ago, Trump described the conflict as a “short-term trip” that is ahead of schedule and nearing its final stage. At 3:55 p.m. ET on Wednesday, Brent crude for April delivery was up more than 5% to trade at $92.21 a barrel, while the related WTI crude contract was up 5.13% to change hands at $87.73.
At the same time, the 32 member countries of the International Energy Agency (IEA) unanimously agreed to release a record 400 million barrels from emergency reserves to prevent a rise in oil prices.
“The oil market challenges we face are unprecedented in scale, which is why I am so pleased that IEA member states have responded with unprecedented collective action.IEA Executive Director Fateh Birol said.Oil markets are global, so the response to major disruptions must also be global. Energy security is the founding mission of the IEA, and I am pleased that IEA members are showing strong solidarity in taking decisive action together.“
But here’s the kicker: Russia is the biggest beneficiary of the Middle East conflict, based on Standard Chartered’s analysis.
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Russians are eagerly looking for alternative sources of both high market prices and desperate buyers.
The US Treasury has given Indian refiners special permission to buy banned Russian crude, as long as it is loaded on a tanker before March 5. Stanchart notes that these loaded, but previously unconsolidated, cargoes have been bought rapidly in the spot market, saying that this temporary relief may double the volume of Russian oil exports to India from 1 mb/d to 2 mb/d in the near term.
Russian crude rose 10.7% to trade at $100.67 a barrel at 1.45 pm ET, trading at a premium to Urals crude to the global benchmark Brent for the first time in history, primarily due to a severe supply shock in the Middle East and changing trade dynamics in Asia. With Middle Eastern “moderately bad” crude (the same grade as Urals) facing a major shortage, Indian refiners have quickly turned to Russian supplies.
This surge in demand was facilitated by a 30-day waiver granted by the United States to allow Indian refiners to receive Russian crude oil in tankers to stabilize local energy security. Brent is a light, sweet sour, while Ural is a medium sour. Because Middle Eastern crude production is currently offline or inaccessible, refiners that need this particular feedstock are paying a $4 to $5 per barrel premium over Brent on a delivered basis to secure Russian barrels.
