Russian Oil Ban on the Horizon, No Near-Term US/UK Trade Deal
A U.S./U.K. trade deal is unlikely in the short to medium term, British Prime Minister Liz Truss said as she arrived in New York.
Truss said her focus was to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, along with trade deals with India and the six countries of the Gulf Cooperation Council. “Those are my trade priorities,” Truss said.
“There aren’t currently any negotiations taking place with the U.S. and I don’t have an expectation that those are going to start in the short to medium term,” Truss told reporters en route to the U.N. General Assembly.
When asked when she thought a trade deal with the U.S. might be feasible, Truss declined to comment.
President Joe Biden echoed Truss, saying such a deal was not a priority.
What This Means for U.S. Reserves
The politicians comments come as the U.S. Dept. of Energy plans to offer an additional 10 million barrels of strategic reserve oil for sale ahead of the EU’s plans to ban most Russian crude.
In March, the Biden administration authorized the release of 1 million barrels per day from the SPR over a period of six months in a bid to lower oil prices and potentially boost domestic production through contracts with companies to purchase future oil at fixed prices.
Volumes in the Strategic Petroleum Reserve have subsequently dropped to just 434 million barrels, marking their lowest level since 1984. At the start of the year, the SPR contained 593 million barrels, and it reached its highest point in 2010, when emergency stocks reached 727 million barrels.
Phil Flynn, energy market analyst at the Price Futures Group. says "the market should be freaking out" about the end of SPR draws. He thinks, when the releases end, it's going to have the impact of losing a major producer — it will really tighten supplies. He even believes it could add another $5 to $10 premium to WTI oil prices.
The 10-million-barrel sale will bring U.S. total sales to 165 million barrels out of the 180-million-barrel target to be sold by the end of next month.
Ban on Russian Crude Oil
The reserve sale hits at a time when Global benchmark oil prices have retreated to levels seen before Russia’s invasion of Ukraine, and coincides with the Organization of Petroleum Exporting Countries (OPEC) discussing the possibility of curbing production.
OPEC and its allies agreed to cut output next month by 100,000 barrels a day. The new sale of 10 million barrels will be of sweet crude and contracts will be awarded by October 7.
Ban preparations in the EU and other countries have already begun, triggering shortages in areas outside of oil.
Oil Ban Preparations and Adverse Effects
Europe’s biggest truck makers are stockpiling natural gas and preparing to shift to alternative fuels amid the threat of a winter shortage as Russia continues to cut off pipelines to the continent.
Europe’s scramble for oil and gas is causing a tanker shortage. The liquefied natural gas (LNG) carrier shortage is particularly acute as much of the fleet has already been booked for winter when demand is expected to climb, especially when Freeport LNG restarts.
Meanwhile, Germany released another 2.5 billion euros of credit lines to secure gas supplies.
Josh Brazil, vice president of supply chain insights at Project44, is stationed in Germany. He says Russian oil bans, coupled with ongoing supply chain issues, will likely cause another wave of global disruption.
"In Germany, it's a little bit different because we have gas rationing coming up. The worry is more about production and keeping just factories going here that are here," he says. "Everything from just keeping factories warm to in-home heating, you name it, it's going to go right to the core of German industry of what lights are kept on and who's showing up to work."
More on supply chain struggles:
Shipping Container Rates Down 63%, But We're a Long Way From Back to Normal Operations
Nitrogen Prices Now Seeing a Resurgence For Fall, and Natural Gas Isn't the Only Driver
Rail Strike Averted: Tentative Agreement Reached Between Railroads and Unions Comes on the Eve of Harvest
