WCP- SECTOR - Russian price cap ? We are hearing they are close to a price cap on oil production coming out of Russia . The goal is to have it in place prior to year end in December . So what has me concerned , I should say massively concerned is how this plays out. I think all producers outside of Russia should be very concerned , as well as the stake holders ( us ).
So they cap Russion oil , granted it's what 9% of global production ? It's enough to cause issues.
1) The stock holders of E/P companies outside of Russia want the price cap to be so low that Novak as he states in todays press release ! Novak states " we won't produce at a loss ". This scenario is massively bullish and I worry it's what everyone is going to be stuck looking at because in this scenario the world is under supplied drastically with the flick of a switch. However ......
2) The scenario that comes to my head regarding a price cap is not so good , in fact it might be terrible at least in the early days ? So all the nations agree to cap Russion oil at $55 per barrel or even $60 ? Remember , there is unanimous agreement here for this to happen. So China , India , the NATO countries all agree . So if there all agreeing to pay $55 dollars a barrel. They now okay Russion oil anywhere to any buyer at X price. I ask myself "
How does this affect the open market ?" I don't think it's good , I feel it's the most sneaky way to pull back oil prices globally , and under guise of hurting Russia. I think this could be in the short term catastrophic to oil stocks , I think the price of Russion oil being close to the cost to produce will skew the free market pricing lower , and not a little , a lot lower.
You know in energy investing I am no expert , so I could be out to lunch here , but in this sector more things happen that I couldn't of imagined to cause pricing to move dramatically at times in either direction.
So in conclusion........ I wonder and worry a price cap on Russion crude 40 dollars below market might skew the free market down massively .
C