Although the barrel managed to reach today, at 09:30, Luanda time, above the 90 USD threshold, at London Brent, the dominant reference for the raw materials exported by Angola, and this is a value that allows for petro-economy to experience times of abundance, if the last semester is taken into account, the raw material has been on a roller coaster between the peak of more than 137 USD and 80 USD, and is currently in its decline phase from which it will hardly be released in the next times.
Close to 11:00, Luanda time, the barrel was worth 90.82 USD, 1.67% more than at the close of Thursday, a slight increase in relation to the significant drop in recent days.
This is because oil is the most sensitive of the commodities to the ups and downs of the global economy, especially to large economies, such as the Chinese, the North American and the European ones, all of them going through serious crises, inflation, unemployment and recession on the horizon. in the West, and of pandemic growth and restrictions in China, which, for example, led the central banks of the USA and the European Union to robust and historic interest rate hikes to face an equally historic and flaming inflation.
Against this backdrop, as analysts have underlined, oil is holding up quite well, with the recent, and also historic, decision of OPEC+, an organization that since 2017 brings together the 13 Exporting Countries (OPEC) and 10 misaligned leaders headed by Russia, to keep the markets balanced on top, to cut production by 100 thousand barrels a day from October, when, since the beginning of 2021, what is seen is a gradual but solid increase in the production of the “cartel”.
For the African countries that make up this powerful organization, which controls 50% of the crude extracted daily around the world – close to 100 million barrels a day, with slight fluctuations in the face of the ups and downs of the markets, or giants (to close to 80 million), as happened with the Covid-19 pandemic, in 2020 -, keeping a barrel above USD 100 for almost six months is a breath of fresh air for its asphyxiated economies, especially the Angolan one, which is going through one of the most serious threats to its social stability without a rapid diversification of the economy being seen as possible to avoid these socio-economic tremors.
In the background, today, after the pandemic tragedy, came the market bonanza generated by the catastrophe that was and is still being the war in Ukraine, which, in turn, resulted in two channels that can both lead to a rise in energy in the markets as well as their downfall.
On the one hand, the conflict in Eastern Europe is generating an inflationary spiral across the West, with the US and Western Europe seeing record levels of 40 years, which is the ideal humus to grow a wide-ranging recession, unemployment rises and social discontent gallops with the ugly in its teeth; on the other hand, sanctions on Russia, for having invaded Ukraine on 24 February, led the G7 (seven most industrialized countries in the world) to agree on a maximum price for Russian oil that reaches the markets, which led President Vladimir Putin immediately saying that if that happens, not a single drop of Russian crude or gas will reach Western Europe and all countries will support this “stupid idea”.
This limit will be introduced on December 5, 2023 for crude oil and February 5, 2023 for refined products. The values are not yet known.
And yes, it is this “stupid idea” that will set the pace for the markets in the next few days, if not weeks.
The US Treasury Department has already made it known, although the maximum values for Russian crude defined within the G7 are not yet known, that this step will be taken and that pressure will be exerted, excluding the risk premium, the such “price cap” will be enforced by the refusal of insurance, financing, market services and sales for ships carrying oil Made in Russia, if it has not been acquired within the defined limit.
Now, if this plan goes ahead, another wind will hit the markets to help the turmoil they are already in, because Putin will turn off the faucet of Russian oil pipelines to the west and the faucet of gas pipelines to western Europe. If that happens, no more crisis in sight, it’s the biggest crisis ever seen just around the corner.
This is because the economy of Western Europe is still “addicted” to Russian gas and largely depends on it, and countries such as Germany, Italy, Austria, the Czech Republic… among others, are not prepared to spend the harsh winter where temperatures reach at minus 30 degrees, but without this being the darkest side of this crisis in perspective, it is the certainty that the driving force of the European economy, German industry, will not be able to resist the dryness of gas from Russia without a catastrophe.
This was even said this week by Klaus-Dieter Maubach, CEO of UNIPER, the German energy giant, for whom “the worst is yet to come”, anticipating that the crisis is already such that everything is at risk and anticipates that prices, which in some cases are already 300% higher than before the war, could rise even further, creating an unsustainable scenario for the economy and families this winter.
What this official came to say fits the also recent report on the German industrial-chemical sector, which warns of the total collapse of the sector if Russia turns off the 100% gas tap for Germany. And there’s something in Europe that has been known for decades: if German industry goes feverish, the European economy goes into a coma without reaching the ground.
And that’s exactly what could be happening if both parties kept their word: if the G7 goes ahead with the cap price and if Putin turns off the taps.
From the second, it is already known that it has managed to divert its exports to Asia, India and China in the spotlight, which was suspended with European and North American sanctions, and should be able to do the same to the rest, given the thirst that those giants Asians always consider cheap energy, while the word of the US and the European Union has been more porous, as can be seen from the fact that they are buying Russian energy more than ever despite the sanctions imposed, whether, like the US, through third parties , that is, like the Europeans, to fill the deposits of reserves before the day to trigger the embargo, which, on which, there is not even agreement between the 27 members of the European bloc.
And even the US is proceeding with caution and chicken broth on the issue of the limit price for Russian energy, because, despite the deep-voiced threat, they slyly clarify that the “limit price”, as the assistant secretary of the US Treasury for financial crimes, Elizabeth Rosenberg, quoted by Reuters, will take into account a “reasonable value” given the production costs for the Russian energy sector, which, can easily be translated into a financial alchemy that aims not to pinch too much the Kremlin’s sensibilities.
But Putin’s answer did not change and warned: “We will not send another drop of crude, gas, coal, heating oil, nothing, we will not send more bada to whoever had such a stupid idea”.
Incidentally, this decision must have been taken after analyzing the possibilities that the change of pipes from west to east could be an alternative, which seems to be the case, with the records of purchases of Russian gas and crude by China, India and other “Asian tigers, with a meeting already announced between Vladimir Putin and his Chinese counterpart, Xi Jinping, for the next few days, which suggests an acceleration in the “rock solid” partnership between Moscow and Beijing, as the relationship between the two countries by the Minister of Foreign Affairs of China, Wang Yi.
For African crude-exporting countries, the worst scenario, the closing of the tap by Putin, may be the “best” news in the short term, because this will lead to a substantial appreciation of energy sent to the markets by the remaining suppliers, of course Angola , which, despite losing production for several years, still sends over 1.1 million barrels a day to the world.
And this is extremely important considering that crude oil – and gas can finally shoot up as an exportable raw material in impressive quantities – still accounts for 95% of Angolan exports, 35% of its GDP and around 60% of tax revenues. .