Last week we talked about one of our favorite oil stocks to play the diesel shortage. The shortage hasn't let up at all in the face of cold weather hitting the Northeast.
Across the Pond, European refineries have purchased too much oil ahead of the December 5, 2022 price cap on Russian oil. It’s quite unclear how that price cap will work – and equally unclear which nations might participate in the economic scheme for it to reach its desired outcome.
The price cap's goal, in theory, is to stop Russia from profiting from the high oil prices prevailing in global markets since its invasion of Ukraine in February 2022. The theory is that countries engaging in this price cap will deny oil transport services that include insurance, finance, brokering, and navigation to vessels with crude priced over the fixed level.
There are winners and losers in this situation. The obvious winner is OPEC – the global oil cartel that sets prices for the bulk of international production. Right now, crude prices are dropping fast as European refiners are suddenly awash in crude.
But things can change quickly after December 5. Even though demand is expected to fall in the year ahead, World Oil projects that there will be “intensifying competition for spot cargoes from the United States, North Sea, and even the Persian Gulf.”