Full Question:

I have been in touch with the Russian Oil Federation regarding prices for Crude oil and one contact gave me a price of $40.00 to $50.00 per barrel [negotiable] and with transport daily for low amounts.

My question to you is why are they able to quote this kind of price when Crude Oil is currently averaging out at approximately $80.00 per barrel?

Answer:

This is a difficult question and it really does not pertain to export. I will try and assist with some straightforward insight.

Associates of the Russian oil federation? Russians are a very intelligent and an extremely well schooled culture [the elderly age group at least]. They have had many accomplishments, most of which we are still finding out about online due to the top level security when these events took place.

Understanding The Animal:

It is a little known fact that as the U.S. went to the moon in July ’69 – seven months later the Russians were remotely driving around the moon with a solar powered vehicle [called Lunarkhod] that was roughly the size of a compact automobile – it stayed in operation for eleven months.

This kind of thing was way ahead of its time back then and ironically, this same country cannot seem to produce a car that runs dependably and doesn’t belch out pollution like a turn of the last century factory.
The communist party doctrine is explained in part as from the people, with the people, for the people to expand its economy. If they say they sell crude oil at a particular price point – you can be sure it is physical crude they are trying to market.

The Russians have a quota structure in place that limits their income earnings due to crude oil selling at not higher than thirty percent. It behooves the Russian people to utilize their smarts and brain power to produce products they can later sell and make a profit on in order to maintain the jobs in these industries for their intelligentsia.

It’s important that Russia does not generate so much crude oil that their economy has more than it needs for one year. In the event that an oil embargo is instigated by the western democracies – Russia MIGHT BE HELD HOSTAGE BY THIS CRISIS BECAUSE OF ITS RELIANCE ON CRUDE OIL SALES.

If Russian crude is accessible just now, it must mean that sales are quite slow at this time. The thirty percent quota is usually bought out well in advance leaving no crude oil that could be utilized for export purposes.

IF YOU HAVE LANDED A QUOTE LIKE THIS IT IS LIKELY DUE TO SOME OR MORE THAN ONE INDIVIDUAL NOT PAYING FOR WHAT THEY ORIGINALLY PURCHASED – SO IT MEANS THERE IS SOME EXCESS PRODUCT.

Russians can’t be held hostage at the risk of economic disintegration if the sale of crude oil was halted.

They also cannot utilize a small number of people to produce huge quantities of crude oil dollars when in actuality what they require is the most number of people working while generating a range of items to be used locally and also for export. AN EXAMPLE OF THAT WOULD BE CHEAP SOLAR PANELS – AT WHICH THEY HAVE PROVEN TO BE EXPERTS AND MORE CAPABLE THAN ANY OTHER COUNTRY [REMEMBER THE LUNARKHOD], STILL, THERE IS NO OVERWHELMING RACE FOR THIS TYPE OF ITEM.

Now let’s take a look at America – one has to love the U.S. of A.

I for one do like America – for reasons equal to my love for the Russians and their cleverness.

If one could come up with a government that was fifty percent capitalist and fifty percent communist – how wonderful would that country be? China is the closest nation that we have to that scenario.

Crude oil is dealt on the market standard i.e. Nymex, Brents, and TAPIS

In point of fact, at FOB it is meant to be sold “spot” and by now stored in the container ships – [Intermediaries can’t efficiently deal in Spot/ primary/ sell to processing plant transactions – we only make secondary market transactions]

The Russians though, market crude oil supported by future transaction conciliation and ultimate transport of product.

The Americans, conversely sell crude oil supported by direct accessibility and supported by pricing generated via investors that are actively purchasing and selling crude oil shares.

Different regions use their own standards. McGraw Hill [Platts] business policies – a quantity of which are good and a number that are not that great are quite evident in crude oil marketing.

In the U.S. they purchase stocks. They purchase stock supported by the theory that that stock could rise or descend in worth one day after the other. If there is a rush on unloaded crude stock, prices will drop – with a rush to buy, the cost will skyrocket – all while that same crude oil languishes in the hold of the ship.

When you hold a commodity share it means that person in fact owns a portion of the crude oil in the ship’s hold.
Imagine if you will that there are one hundred ships loaded to the decks with crude oil, and each day as actual portions are sold – another ship moves in to take its place. Every ship contains 250,000 mt.

When it reaches the point that one hundred ships turns into one hundred twenty ships, crude oil sales are stalled and investors start to get concerned – the shares are dumped like a cheating spouse and then the price of the crude itself also starts to drop.

Conversely, should those same one hundred ships fall to eighty ships, and down to seventy and then fifty – rising again to sixty, up again to eighty and then down to fifty again, there is obvious strain to revert back to the beginning when there were one hundred ships – now share prices will elevate since many further investors purchase stock in crude oil.

So a purchaser in America is picking up product that is distinctly a DERIVITIVE of crude oil and this adds up and non-natural prices are created.

The derivative worth is the inherent worth not only crude oil on its own but also the movement of same in sales.

The U.S. had developed an ASSESSED COST on the strength of an ASSET that already had some worth. EVEN THEN A SECONDARY ASSESSED COST, A THIRD ASSET AND THEREFORE A DERIVITIVE ASSESSED VALUE CAN BE DEVELOPED…and so it goes on and on.

An example of this would be if you let me have a billion dollars to purchase DLC crude oil – that we promise not to use – that is until the purchasers DLC is sustaining it – and I then promise you a twenty percent return in 90 days. Should the agreement fall apart, you have been promised that all your money will be returned and should the agreement proceed as planned you will have generated a twenty percent return in 90 days. WOW! A Great Proposal AND A Great Transaction!

This amounts to yet another derivative – An assessed rate derived from the assessed worth of another.
The prices for crude oil are generated pricing endorsed by a capitalist financial system – a system whereby employment for the mainstream civilians does nothing for the idealism that there is not a thing awry with grossing lots of money for an individual personally.

There was a time when deals of the type just mentioned above that were made based upon speculation might have paid off handsomely – though today things are not so tidy. With the Internet and electronic banking systems in place and not being written in to the scenario while the rich get filthy rich not by being smarter but by being sly and crafty manipulators while taking a toll on the national citizenry within that capitalist nation. It is a fact that ninety nine percent of the hard working population create the wealth for the remaining one percent to benefit from.

A capitalistic economy has some grim problems.

Also by being sly – ponder this thought – should FTN sign an agreement for one billion dollars of crude oil or sugar or some other commodity, a DCL needs to be directed FROM A MAJOR BANK and this is PRIOR TO any speculating traders realize that bankers are alerted to before speculators, when to purchase sugar or crude oil stocks since they would have been aware of the FTN agreement much sooner than somebody else.

Consider now that the state of California on its own normally deals one trillion dollars worth of monetary transactions yearly on average.

So I think you understand, I could continue for some time describing similar circumstances.

Also understand regarding Russia and the United States – there will be a cost of a few dollars to drill crude from below ground these days when in past years the cost of a BBL was as much as $150.

Learn from the books and begin to trade with your Russian contacts but make certain that you are one hundred percent sure that you are dealing with genuine product [since 99.9 percent are phony]. Set aside a few dollars per BBL as a commission charge – manage the transaction and provide the remaining discount to a genuine purchaser as a method of enticing them to follow through with a purchase. Try avoiding the common blunder of attempting to keep the degree of difference all to yourself – chances are good your deal will crumble and you will net zero – Greed is almost always fatal for a transaction.

PS: Follow up on the information below and previous answers from yesterday

CRUDE OIL: FROM RUSSIA

Let it be known that the United States of America and the Russian Federation have each signed on to honour the Hague Convention of October 5th, 1961. With respect to this convention, if documents from the United States are to be considered legitimate in Russia, they need to have an Apostille – a certification that verifies the authority of the official from government who has signed the document, the legitimacy of said signature and perhaps if warranted, the stamp or seal upon the documentation. Any credentials that bear the Apostille are not required to undergo any additional legislation

The same thing that applies to the American Government also is the same for numerous other nations. That said, should you receive merchandise from a Russian Intermediary, the agreement concerning the export is required to be endorsed by the powers that be within the government that permits the export of merchandise – that is unless the party is an entity of the government itself.

That does it for many of the Crude Oil proposals that are in play.

When the validation of the agreement through the Ministry of Energy, Russian Federation, duplicates of the validated contract are then traded between all parties of the agreement in about a week of the signatory endorsement by electronic means.

Whether or not there have been alterations to the rules – these modifications would be small – FTN insists upon comparable records to be in place also.

Some of those usual delivery records would be:

• Duplicate of license to Export: The Russian Federation, Ministry of Energy department;
• A duplicate of Approval to Export: The Russian Federation, Ministry of Justice department;
• Duplicate of Statement: Availability of the Product;
• A duplicate of the Russian Refinery Commitment To Produce the Product;
• A duplicate of the Transneft pipeline Agreement – to Port of loading;
• A duplicate of Russian Port Storage Contract;
• A duplicate of Tank Receipts and the SGS Report;

Basically, you receive an offer for Russian Fuel or Crude – whereupon you then investigate the offer – you request that the “Seller“ specify delivery credentials and if you are receiving what was just set out above you can carry forward with the deal – if not, RF it.