The math does not work for me. The math does not add up. Russia exports around 7 million barrels of crude and oil products. You can add up the spare capacity of Saudi, UAE, Kuwait, Iran still they cannot fill the gap immediately. Iraq is having trouble filling its quota. It will take months to increase the production. There are limited rigs and workers.
A few producing countries may have oil in storage that would be available. The only way to fill the shortfall would be to use strategic reserves that the world has already used twice. The US has sold some of the reserves to raise cash once. So the reserves are getting low too. There might not be enough reserve to fill the gap till some can ramp up production. Venezuela has the world’s largest oil reserves but its oil structure has been destroyed by sanctions. Now the US has sent a delegation to them to increase production. That is a time-consuming project.
Biden banned the Keystone XL Canadian pipeline. Canadian oil is trapped. Canada is telling the west that we can replace Russian oil. In principle, they can but it may take them 5 plus years to build oil sand mines, upgrades and pipelines.
There are reports that China is buying the floating Russian oil at a discount. Some estimates put Iranian oil storages up to 30m barrels but the floating storage of Iran has already been purchased by China. Seems Iran may have some on-land storage. Some of that is smuggled to Pakistan and neighbouring countries. China has been constantly expanding its storage capacity and buying any excess oil when it can. That is one country that can build anything in a matter of days and they have been constantly expanding their storage capacity. There is limited information that comes out of China.
West is dumping Russian assets and China will end up owning them like they have bought so many natural recourse assets around the world. Some of those Chinese assets would have multiplied in value because of hyper commodity inflation and they have the security of supply. It seems that China is the biggest beneficiary of sanctions
Now the US is in such a binds that they have to remove sanctions from Venezuela and Iran and go begging Saudi Arabia and most likely the Prince.
More than 6,000 everyday products get their start from oil. If the oil supply chain is messed up then there can be huge shortages of other products. The supply chain is already disrupted.
I am sitting on a basket of Canadian oil stocks that were purchased last year. I have to decide when to lock in profits. A very hard decision in a bull market and I have a tendency of selling too early. Once I took my principal investment out.
Currently, oil prices are unrealistic and not sustainable and will cause a recession. From here there will be massive volatility in the oil sector. In the meantime, the math about Russian supply disruption does not add up for me. I have decided to wait and observe.