Oil prices  

The Russian invasion of Ukraine resulted to oil prices breaching US$110.00 per barrel.  European benchmark Brent North Sea oil reached US$113.02 while New York-traded West Texas intermediate hit US$111.50. This is not difficult to understand though. With Russia at war with Ukraine and the brutal sanctions from the West in effect, its oil deliveries will be disrupted.

Whether prices continue to soar while the war is still raging on, we do not know.  Historically, however, we saw prices reaching US$147.27 in July of 2008.  And Russia, not able to export its oil make non-oil producing (and those with inadequate domestic production like the Philippines) countries shiver.  

The reason is very obvious. Russia is the third largest oil exporter in the world today. So, it means, its oil production influences the market. Let us not be blind though of the fact that there are other countries that have bigger reserves and are capable of augmenting their production output. Haven’t we remembered that OPEC member countries had production cuts (to raise prices) as oil prices plummeted over a year ago?

For better understanding, let’s take a look at the top ten oil exporting countries in the world. According to the United Nations Statistical Division (as gathered by Investopedia), these ten countries account for three-fourths of global oil exports. 

1. United Arab Emirates (Though just the seventh largest producer in the world, it exported US$176 billion worth of oil in 2019, accounting for 16.13% of global oil exports.  Notably, it has the seventh-largest oil reserves in the world totaling approximately 100 billion barrels),

2. Saudi Arabia (Overtaken by UAE as the world’s top exporter, it accounted for 11.54% of global oil exports in 2019. It also remains the top oil producer in the OPEC, producing 10.81 million barrels of oil per day, or about 12% of global output in 2020 and owns about 15% of the world’s oil reserves),

3.  Russia (In 2019, it accounted for 10.53% of global exports, totaling about $115 billion. In 2020, production reached as many as 10.5 million barrels per day.) 

4. Kuwait (It accounted for 7.55% of global oil exports in 2019, shipping more than $82 billion worth of oil that year. It produced about 2.75 million barrels of oil per day in 2020, making it the world’s tenth-largest producer. The country’s reserves are the sixth-largest in the world.)

5. Iraq (The second largest in OPEC, in 2019, it exported about 6.34% of oil exports that year.) 

6. Canada (The $68 billion worth of oil it exported in 2019 comprised 6.25% of the global total. Its known oil reserves of 167 billion barrels are the third-largest in the world.) 

7. United States (It exported over $62 billion worth of oil in 2019, comprising 5.71% of global exports. It significantly increased its oil output between 2011 and 2020. In 2020, the U.S. produced 18.61 million barrels of oil per day, about 20% of the global total.)

8. Nigeria (It exported $38.7 billion worth of oil, about 3.5% of the global total.  It has the second-largest proved oil reserves on the continent.)

9. Mexico (Its exports, worth about $37.1 billion, accounted for 3.4% of the global total.)               10. Norway (It exported $27.3 billion worth of oil in 2019, accounting for 2.5% of the global oil trade. It has the largest oil reserves in Western Europe and sends the vast majority of its oil to its European neighbors.)

Remember, these countries are ranked based on oil exports. Production-wise, reportedly, the USA overtook Russia as the world’s largest in the world in 2018 as it pushed for shale production and adopted energy independence policies. 

Notably, these two countries (USA and Russia) never ranked higher than UAE and Saudi Arabia in exports because they have bigger domestic consumption. 

Curiously though, while Europe is highly reliant on Russian oil exports, it joined the USA in sanctioning Russia for its invasion of Ukraine. Whatever drives them to do that we do not know, the fact, however remains that Russia is also dependent of the European market.  Reportedly, in 2020, 48% of its oil exports went to Europe. More importantly, for Russia, between 2011 and 2020, oil and natural gas made up about 43% of its government revenue.  Well, that tells a lot about Russia’s durability in this ongoing war. Let’s see which country or group of countries will blink first.

In the meantime, Morgan Stanley now sees Brent averaging “US$110 in the second quarter, up from a prior forecast of $100.” Under the firm’s bull case or scenario, “prices will jump to US$125 per barrel.”