Russia hinders the return of Iranian oil

Brent 1st-nearby briefly fell back below $120/b yesterday before rising again and now trading above $126/b. The price levels are so high that one gets used to huge intraday swings. All of this reflects the instability of the market and the very high level of uncertainty. The US administration seems very close to declaring an embargo on Russian oil but Europe is resisting, especially Germany. In fact, however, the collapse of Ural prices shows that Russian oil exports are already in free fall as well, but this is mostly for shipping, less for pipelines.

Similarly, diesel prices are soaring (with crack spreads on diesel exceeding $40/bbl) and are being echoed in Asia as Europe seeks to replace imports from Russia. This will result in a considerable increase in costs for industry in Europe. 

On the Iran side, predictably, Russia is seeking to slow down a possible nuclear deal by introducing new demands, in particular that sanctions over the war in Ukraine do not affect its trade with Iran. It seems very likely that the market has already priced in the idea of a return of Iranian oil at relatively short notice. So this only adds to the upward pressure on the oil price in the short term.

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