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Did we miss the Russian U-turn?

Published Thursday, May 1st, 2014

President Putin unreservedly apologized to the people of Ukraine and to the Security Council of the UN for occupying the Crimea. He withdrew his troops from eastern Ukraine and instructed Russian oil producers to turn on the tap. He expects his country’s oil production to exceed 12 mbpd as early as June. Oh yes, and the US economy is roaring and the Federal Reserve surprisingly increased its bond buying programme by $10 billion and now stands at $65 billion per month again.

This is the impression one can get by simply looking at yesterday’s closing prices. The DJIA closed at a new record high, WTI lost more than $1.50/bbl, Brent nearly $1/bbl, Heating Oil 3.5 cents/gallon and RBOB 5.5 cents/gallon.

Reality, however, could not be further from the above scenario. The IMF says that US and international sanctions are causing damage to Russia and revised the country’s 2014 growth to 0.2% from 1.3% and predicts $100 billion of capital outflows. Moscow-friendly separatists seized government buildings in eastern Ukraine and Standard and Poor has downgraded Rosneft and Gazprom.

To read the rest of the report, please click here 

Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.