Crude Reality For Emerging Markets

This chart comes to us via the “Polish Swish,” known for his nuttin’ but net baseline jumper.  It illustrates the local pain of rising oil prices in a few selected emerging markets.

Crude oil is priced in dollars, and countries which have seen their currencies get hit this year are suffering asymmetric pain, complicating and adding to local economic  and inflationary pressures.   India, China, Taiwan, Chile, Turkey, Egypt and Ukraine are the emerging markets most vulnerable to $100 per bbl crude.

Oil prices have made a beeline to $75 bbl since mid-August as traders front-run the Iranian sanctions coming online in November.

The second period of sanctions will take effect from Nov. 4, after which Iran’s port operators, shipping and shipbuilding sectors will be limited.

The National Iranian Oil Company (NIOC) will also see sanctions along with petroleum-related transactions that include the purchase of petroleum, petroleum products, and petrochemical products from Iran.

Along with the impact on Iran’s energy sector, sanctions will also affect transactions between foreign financial institutions and the Central Bank of Iran.

“In addition, effective Nov. 5, 2018, the U.S. government will revoke the authorization for U.S.-owned or -controlled foreign entities to wind down certain activities with the Government of Iran,” the Treasury statement said.
–  Albawaba

 

The price of crude futures denominated in dollars are up almost 20 percent since mid-August and 25 percent year-to-date.

CRUDE_EM_Currency

This entry was posted in Crude Oil, Currency, Emerging Markets, Uncategorized and tagged , , . Bookmark the permalink.

6 Responses to Crude Reality For Emerging Markets

  1. Thanks for your useful charge on the price of Brent Crude in various emerging market currencies.

  2. Greg says:

    Do all these emerging economies use light sweet crude? Or do they rely on heavier grades of crude for their domestic refineries?

    Iranian oil tends to be heavier than Brent. And its MUCH more sour than Brent. Iranian crude is not a substitute for Brent (not even close) — a refinery that was handling Iranian would have to be completely reconfigured if they bought Brent.

    Too bad the majority of Wall Street “analysts” think all crude is the same

    • macromon says:

      I don’t think that is the case, Greg. You need a benchmarket, and we think Brent is probably better, and why we always monitor the spread between Brent and WTI.. See our Global Risk Monitor Thanks for comments.

      • Greg says:

        You monitor the spread between brent and WTI — which are both light sweet crude grades. You should know that before writing blog posts about crude oil.

        Iranian crude is known as heavier and its a lot more sour.

        If you can’t be bothered to do even rudimentary research on crude oil, your blog post should be deleted.

    • Greg says:

      For those who actually want to understand crude oil grades, here is a chart from the Energy Department
      https://www.eia.gov/todayinenergy/detail.php?id=7110

      Iranian crude is generally lighter, and its much more sour than WTI and Brent.

      Seriously macromon – you shouldn’t comment on things you obviously don’t understand.

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