Ref: AD-2885
Summary: even though much of the commentariat’s analysis of Opec+’s 2 November decisions is as overly simplistic as the cartel’s public justifications, calling an unwinding ‘time out’ in 2026Q1 is by no means unwise.
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In the 4 November Newsletter I suggested that investors would do well to pay more attention to Ukraine’s targeting of Russian energy-related Infrastructure. I’ve just been watching a very interesting clip [watch on YouTube here] by political commentator Peter Zeihan on what he describes as “three new strategies” in the Ukraine war. The first two are shifts in Russia’s approach. The third focuses on Ukraine’s attacks on oil installations (3 minutes 13 seconds in), in particular its recent strike on the Black Sea port of Tuapse in which, in addition to infrastructure, it also hit at least two, possibly more, vessels from Russia’s shadow fleet.
Mr Zeihan goes on to make some very interesting points about the insurance of these vessels which – thanks mainly to EU sanctions – are not covered by normal maritime insurance (e.g. Lloyds of London) but by either the Russian government or governments of countries still purchasing Russian oil. As he argues: (a) if a government insuring a sunk tanker does not pay up, it becomes a free-for-all even as far as seizing vessels is concerned (as happened in the Baltic recently); or (b) if they do pay out then the Ukrainians have every interest in continuing to hit tankers to inflict maximum economic loss on Russia and its market countries. It’s not yet clear how this will play out; but, clearly, there is nothing but upside for Kyiv in escalating its strikes still further – possibly even to the point of closing Tuapse down in the process.
All this being said, consistent with points I have been making in successive oil-related newsletters, the massive surplus already in markets means that the world can manage with a lot less Russian oil than it seems to think it needs without incurring a major and sustained spike in the price of crude.