In a true Globalized, Open, Capitalistic market, there is always a winner, no matter who the counter parties are. And that winner is NOT one of the counterparties!!
My friends, it might be a cliché but history is indeed repeating itself.
The year was 1979: The first Iranian oil embargo beginning in 1979 effectively handed Marc Rich, whose company ultimately became Glencore (one of the world’s largest physical oil and commodities traders), the keys to a multibillion dollar oil-trading kingdom.
The year is 2011: EU placed an embargo on Iranian oil. Now, it was China’s turn. China’s growing global oil trading companies are in the driver’s seat. And unlike Marc Rich’s secret trades, Chinese firms can do it openly. Since, they are confident that Beijing values stable and secure oil supplies much more than cooperation with Washington or Brussels, on the Iranian nuclear issue.
The EU sanctions, which will affect about 450,000 barrels per day of oil imports to Europe, will likely transfer billions of dollars in oil earnings from the Iranian government to China’s main oil trading firms: Zhuhai Zhenrong, Unipec, Chinaoil, and Sinochem. These firms have become major players in the global physical crude oil market.
The crude oil prices have never adhered to the economic principals. The current $100+ barrel (Nymex) is not the result of increasing demand or decreasing supply. If you think the 2007 US mortgage market was a mess, you won’t believe what goes on in the oil trades. As of today global oil consumption is around 85 million barrel PER DAY and the oil futures markets routinely trade more than ONE BILLION (with a ‘B’) barrels of oil PER DAY. There is a reason why the largest trader of oil in the world is not an Oil company, but a trading and a financial services company.
Hence, it’s proven again, the basic economics mantra of ‘Demand and Supply’ doesn’t imply to the Crude Oil market. In case of global oil trade ‘It’s the Economics Politics, Stupid’.
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