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Streetwise Professor

November 13, 2008

$47.85

Filed under: Economics,Energy,Politics,Russia — The Professor @ 9:39 pm

That’s the price of Urals Med (per the online WSJ).   Interestingly, the basis between Urals and Brent widened dramatically today.   It was about $.70 yesterday, and earlier in the week.   Today it blew out to $2.60 (i.e., Urals was quoted for $2.60 less than Brent.)   I don’t know why the basis moved so strongly today, but it is another ill omen.

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1 Comment »

  1. Craig,

    How do you interpret this article: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5141799.ece? It seems to me that it is a harbinger of some pretty serious problems to come: Russian companies can’t invest in production which will cripple the Russian economy and if oil companies are not selling oil abroad, this leads to fewer dollars and euros coming into Russia, which will lead to a growing trade imbalance.

    The article writes:

    Leading Russian oil producers, including TNK-BP, BP’s Russian affiliate, are grappling with a collapse in profits from the export of Siberian oil.

    Heavy export tariffs have almost wiped out the profit margin from selling crude oil outside Russia, forcing Siberian producers to sell at prices as low as $10 a barrel on Russia’s domestic market. Fears are mounting that the profits squeeze may speed the decline in Russian oil output, already down 6 per cent this year.

    The profits crunch, caused by the collapse in the worldwide price of crude, is provoking concern within Russia’s oil community that capital expenditure budgets will have to be cut if profits from oil sales do not recover. “The tax burden is very tough,” Valeri Nesterov, an oil analyst at Troika Dialog, the Moscow brokerage, said. “The problem is that the future of the oil sector might be jeopardised if the Government doesn’t reduce the tax burden.”

    Comment by Michel — November 14, 2008 @ 12:09 pm

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