Imagine a world where autocratic countries trade only with each other. Russia, Saudi, Iran would basically only sell oil to China+, but China+ would need a lot less oil because they would not have the EU and US as export markets. So there would be 20mbd to be sold for 10mbd of 1/
import demand maximum, leading to prices crashing, in Yuan, and leading to all those economies collapsing. There is no creativity under autocratic regimes, so what else would they do? Pretty much nothing. They all despise the west, but could not live without it. 2/
China’s domestic economy is not strong enough to have economic growth without exports to the west. And for the jokers who think this is the end of the USD as reserve currency: do you really believe that a currency of any autocratic country 3/
would be a better alternative when its economy can only collapse, and with massive capital controls which can only grow? END
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A few thoughts on the OPEC++ meeting. Great effort from all parties so far, at least on paper. Now what does that mean for oil prices? We are still likely to reach tank top late April/early May. But inventories are likely to then draw from June onwards and reach today’s levels 1)
in about 1 year. Is it good news for oil prices relative to the alternative of no deal or much smaller cuts? I am not so sure. Large production cuts would have happened through shut ins from May onwards anyway due to the lack of demand and storage availability. 2)
It would have been a lot more disorganised. The weakest producers would have had to go under or be bailed out by the government. Assets would still have been taken over by stronger oil companies. I think it leads to lower prices a year down the road relative to if 3)