Sanctions Are a Bitch – U.S. Refiners Importing Russian Oil Like Mad

Gold Goats and Guns – by Tom Luongo

It’s a headline so funny I literally ruined a keyboard spitting out my coffee yesterday.

Working off a stub from Bloomberg, Sputnik took a lot of joy in amping up the irony.

The market needs to be fed. And refiners will buy whoever has the best cargo at the best price. It is only politicians who don’t understand that you can’t dictate to the markets.

Now refiners in the U.S. have been under pressure with rising oil prices but Russian oil isn’t brought in to supply the tight gasoline market. Russian Urals grade is considered heavy-sour which is better for refining into diesel and other heavier grades.

And it is being sent right to the refineries that normally process Venezuela’s very heavy crude (PADD 3 – Gulf Coast).

Don’t think for a second that this is some kind of Trumpian quid pro quo or anything. That he promised Putin a few ducats to look the other way in Venezuela. I know stupid libs of the Young Turk variety will think this. So will the Q-tards in the MAGA crowd.

But, no. This is simply normal market action that a bunch of clueless morons in D.C. can’t control. Refiners need feedstock to refine or they go out of business.

Russian Urals regularly trades at a discount to Brent crude because there is no good benchmark for it. Remember, both West Texas Intermediate and Brent are light-sweet grades.

Only the Dubai and Shanghai oil futures exchanges list contracts for deliveries of heavy sour.

So, it’s no surprise to me to see it being a direct substitute for Venezuelan crude while the U.S. embargoes it. If the Russians gain the market share lost by Venezuela while, at the same time, providing the financial infrastructure — payment clearing, insurance, etc. — for Venezuela to sell their oil to other markets, like India, what, in the end is the net effect of all this sanctioning and war-mongering?

Nothing, of course. But you can’t tell that to insane authoritarians like John Bolton. These are men who can only think in terms of primary effects and overly-discount the market’s ability to overcome obstacles. And so, they get frustrated by secondary effects, like the simple substitution of Russian oil for Venezuelan oil by domestic refiners.

Wait a couple more months and you’ll see Ted Cruz (R – Exxon/Mobil) introduce new sanctions via CAATSA against the Russian shipping companies bringing the oil to the Gulf Coast as a matter of ‘national security.’

He’ll be joined by Lindsay Graham and the rest of the braying Repuglican jackals and it’ll be used to force Trump to cave on some other issue of the day.

You can’t reason with insane people. And the longer they are in power the more they force sane people to act stupidly to do rational business. We’ll see more stories like this as Trump’s war on markets continues until he either breaks them or they break him.

Gold Goats and Guns