Crude Oil - High TideCrude oil is a very complicated market at this time - difficult to see through the fog. Given the second Trump presidency in January of 2025, Russian sanctions on exports and an ever complicated situation in the Middle East, the market appears virtually untouchable.
So let's break it down. Given that Trump has been granted a second term as president as of the first week of November 24', this is the single most important variable - and I will elaborate why.
The lines of resistance and support on this chart were drawn nearly a year ago yet remain relevant why? Because crude oil to the world, is priced in US Dollars. Any nation seeking to trade their natural resources is looking towards NYMEX, not because it is ideal but because it is LIQUID. This theme is virtually omnipresent in commodities and should be made note of. Regardless of what market a given entity is using to buy and sell commodities - particularly energy - it is priced given the current price of the most LIQUID index. So a sale of Russian oil brokered between China and India will bear some respectiveness to the NYMEX price of light crude oil, regardless of what product is being exchanged.
So first, lets try and examine the logistics of UREX crude.
As we can see, export of Russian crude oil has declined since it's invasion of Ukraine in 2022. This would be expected, given that not only do EU sanctions against Russia specificy against its' ability to trade its' natural resource, but for international suppliers to qualify for insurance in transporting Russian product. This is an extremely difficult notion to quantify, and will only be approximated for the purposes of this essay. It is implicit given the energy security structure of the EU that Russian aggregate product (energy) will be supplied regardless of sanctions, however this agreement becomes more complicated and pricier for the EU when examined from a global perspective.
According to the media, Russia controls the marginal barrel of oil globally. This comes as a multi- decennial effort by the Putin administration to isolate Russian oil markets from influence by the US Dollar - a bold effort, for better or worse, has succeeded. Meaning that theoretically Nthrough OPEC, Russia can starve its competitors of profit by keeping the price of oil low enough that only they can produce profit at the margin, even in spite of EU sanctions.
An unflagged, or unregistered, fleet of commercial ships has emerged since 2022, which is extremely relevant to the proposed thesis. However given the opaque nature of this commercial fleet cannot be investigated, it will be assumed that they are enabling the commerciality of Russian crude oil globally, having secured a black market outside the realm of commercial shipping typically secured by the largest Navy globally, the USA.
The US Navy has ceased to protect commercial shipping in proximity to Yemen, as rebel groups such as the Houthi continue their aggression towards Western flagged commercial vessels. However, it is unclear of the influence of "black flagged", or unregistered and uninsured vessels carrying Russian crude, among other potentially illegal product through the region.
This is relevant, because as insurance rates have risen for global carriers, so too have the protests by major carriers against the sanctions placed against Russia. In a purely hypothetical landscape, carriers deemed illegitimate in the Western sphere of affairs have been able to transport product at a lower crude price, at a negotiable insurance rate previously commodified in the Western world. Commercial shipping insurers have at large protested against EU sanctions - unable to compete with the emergent black market.
Now we will assume that a Trump presidency will resume the regularity of oil exports and pricing as dictated by OPEC - however there remains several months of "negotiations". We can assume Trump parties have influence over these negotiations going into the January inauguration, yet a critical gap remains. As any nation would, the Russians and Saudis despite OPEC have an opportunity to control without impunity the marginal price of oil - the price at which US producers of crude oil will produce a profit. Historically it would be in the best interest of these nations to produce oil within the aforementioned margins.
However, given the global stance against fossil fuels, there is an opportunity for otherwise sanctioned nations to seize a great deal of power over their Western counterparts. Many refineries and wells in the US have been rendered dysfunctional under complex and opaque legal code instituted by the Biden administrations, and are unable to compete against their Russian counterparts altogether. In which case, before a "free-market" administration such as Trump in 2025 can stabilise crude markets globally, OPEC participants could force the price much higher. In spite of sanctions and a lack of negotiations, a elevated crude price would prove disastrous for developed nations such as Great Britain and Germany, who have no choice but to submit to Russian demands - or wait for US oversea exports, the logistics-intensive alternative.
In light of rapid and progressive political change, the crude oil market is an absolute hotbox. It is difficult to prove with data and charts what an opaque and mysterious market this is, but one can only assume OPEC has all the data a future Trump administrations has - which indicated unfettered Russian control over the price of crude oil as long as the war in Ukraine continues.
Whether peace can be negotiated remains a question for 2025. But for traders looking into commodities for 2025 - expect nothing less than chaos. The introduction of a black fleet complicated the role of OPEC immensely, who may seek over the next several years to integrate this emergent problem back into insurable shipping groups. Either way, EU sanctions have produced a long-term consequence to the market which should be on the radar of any savvy trader. Given the strength of the US Dollar and the consolidation trend in oil, any elevation in price will benefit Russians more than any other financial entity. It seems unlikely as of the time of writing the price will decline any further, as no party stands to gain below $70/barrel. An embargo as seen back in the 70s could push prices well over $100/ barrel, placing EU energy security in dire straits.
