Saudi Arabia Will Increase Oil Supplies Because Of Ukraine
Masterforex-V | Jun 04, 2014 05:29AM ET
The Government of Saudi Arabia stands ready to increase the supply of oil significantly due to the political crisis on the territory of the Ukrainian state.
Information about such a decision of the Government of Saudi Arabia has appeared on the pages of the business periodical International Business Times, which indicates the head of the Ministry of Petroleum Industry of Saudi Arabia Ali Al-Naimi as the source of this decision.
Al- Naimi said that the Saudi government was ready to increase significantly oil supply to the world markets if Russia began to decline the exports of "black gold" into the European states, and militants from groups with pro-Russian sentiment would continue their activities associated with destabilization of the political situation in Ukraine. According to the oil minister of Saudi Arabia, the decision was reviewed by the state government due to the fact that the above events could have an impact on the deficit of oil on the world markets.
According to the head of the Oil Ministry, the Saudi government is ready to compensate in full any shortfall that may arise in connection with the above terms. However, according to Al-Naimi, today it is too early to say that there are similar problems on the world markets. According to the Minister, at this stage of the event the level of oil resources continues to remain fairly stable in the world markets and there are no significant reasons for fundamental changes to date.
Al- Naimi also said that the concerns about oil supplies from the Russian Federation to the territory of Ukraine and European countries had arisen in connection with military operations in the eastern regions of Ukraine, which were triggered by militants of the armed groups, having pro-Russian sentiment. According to Al-Naimi, the military actions, which began in Ukraine, strengthened significantly the already strained relations between the Russian Federation and the leadership of the European countries. Al-Naimi also said that as a result of the emerged fighting actions in the eastern regions of Ukraine the prices for Brent Crude Oil stick the figure $108 per barrel after the price of the same brand of oil rose to an annual maximum - 112.39 USD per barrel on March, 3rd.
In addition, Minister Al-Naimi said that oil resources increasing, delivered from Saudi Arabia might reduce its value on world markets to the level of 100 dollars per barrel.
Let’s recall that these solutions were considered by the government of Saudi Arabia in connection with the holding of a referendum to determine the status of the region by pro–Russian movement activists in Donetsk and Lugansk regions. The holding of this referendum raises concerns associated with the aggravation of the political crisis in Ukraine and further escalation of the situation.
According to the results of the referendum, about which stated the separatists, more than 89 percent of the Donbass residents supported the state independence of "Donetsk People's Republic", which was proclaimed by the state federalization supporters.
The representatives of the OSCE, the European Union, the leadership of the United States and several other countries in the world do not recognize the legitimacy of such a survey, because it has no legal force, which would be confirmed by the current Ukrainian legislation. In addition, the leadership of the United States has expressed threat to the government of the Russian Federation related to the introduction of an additional package of sanctions in case of recognizing the legitimacy of the referendum by the Russian side.
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World oil prices are rising because of the events in the east of Ukraine.
The evidences have appeared that in the course of trading on the world market on May, 12th oil prices began to rise. In particular, Brent oil prices have risen for the first time in three trading sessions. This is due to the concerns raised regarding the fact that the tensions in Ukraine increased significantly, that was observed after local referendums; this could lead to the temporary suspension of oil supplies from the Russian Federation to the world market.
Chart, oil quotes in April - early May:
June futures for Brent crude oil in the course of trading rose by $ 0.49 (0.45 percent) on London’s exchange ICE Futures. Now the price of oil is 108.38 dollars per barrel.
The futures on WTI crude oil for June during trading on the New York Mercantile Exchange (NYMEX) rose by $ 0.76 (0.76 percent) compared with the ones on May, 9th reaching 100.75 dollars per barrel.
According to experts, the Ukrainian factor has a significant impact on the oil market. In connection with the situation in Ukraine, the experts observe significant geopolitical risks on the global market, which explain the increased demand for oil and oil products, which was observed on the stock exchanges in recently.
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