Most of us are aware that there has been recent tension between Russia and the United States. Although, many of us do not realize that Russia is coming close to owning a majority share in one of the United States largest oil companies (Citgo). Citgo Petroleum Corporation is a large American refiner, transporter and marketer of transportation fuels, lubricants, petrochemicals and other industrial products.
What does Russia have to do with Citgo you ask, isn’t Citgo a Venezuelan company? Citgo’s parent company (Petroleum of Venezuela) is owned by Venezuela, but in a recent effort to get a large loan from Russia, the nation gave up 49.9 % of Citgo to Russia’s state-owned oil company “Roseneft.” If Petroleum of Venezuela (PDVSA) cannot come up with the money to pay back its loan, then Russia is likely to take over majority share of the company. This idea scares some folks, but other experts say there is no need to worry.
The question at hand, is, does Russia have the ability to cause real harm to the United States and its oil supply? Energy expert John LaForge of Wells Fargo believes that it would be difficult for Russia to do any “real damage” to oil and gas prices, by simply becoming the majority share-holder of Citgo. The reason being, is that Citgo handles only 800,000 barrels of oil per day. While this is good volume, it is only a small piece of the twenty-some million barrels of oil that the U.S. consumes every day. He states that while 800,000 is no chump change, “other refineries would love to pick up the slack,” if Citgo’s operations were indeed at risk of changing.
Oil prices are relatively flat this morning ahead of the American Petroleum Institute’s (4:30 p.m.) report today. According to Tamas Varga (PVM), today’s prices are taking a pause as they take a very slight dip downwards. He believes that the market is experiencing the in-between phase before it continues on its path upwards.
Relevant to the oil world today
- Tensions in the Middle East continue to give oil prices support
- Russia’s intent to take majority share of Citgo
- Eyes are still on production cut meeting in May
As of 09:46 am, the market is down approximately 50 points on both Heating oil and RBOB, while WTI crude is relatively flat.