the participants in the transaction OPEC+ decided to force another meeting on the issue of extending the deal on the limitation of oil production. Date of the next Ministerial summit postponed from 11 to 4 June. Officially the proposal made by Algeria, but it is likely that the initiative came from the leader of OPEC – Saudi Arabia, whose budget is bursting at the seams and urgently requires financial intervention. According to foreign media reports, Russia with great reluctance, but agreed to discuss the prolongation of the transaction. Experts believe that the extension agreement will keep oil prices at current levels. However, this will not allow our country to achieve the metrics approved three-year budget, so for social obligations, Russia will have to use Fund of the national security resources which do not seem to be bottomless.
In the agreement of the countries that initially took part of the OPEC deal, it defined the gradual decline in production over two years: 9.7 million barrels a day in may-June 2020 7.7 million barrels — up to the end of 2020 and 5.7 million barrels a day until may 2022. Now we are talking about the fact that a number of States wants to maintain the current level of reduction of production and after June 2020.
Officially, the postponement of the negotiations was provoked by Algeria. According to Reuters, Mohamed Arkab, the energy Minister of this country (which, incidentally, is not included in the top ten world’s major producers of “black gold”), stated that “held talks with several Ministers,” and the postponement of the meeting will facilitate the distribution of oil between the traditional buyers, depending on demand.
both Russian and Western experts believe that to take such a step Algeria has forced Saudi Arabia. This country is currently experiencing a significant shortage of funds. Budget revenues from oil exports Saudi Redam decreased by 25%, and the budget deficit exceeded $10 billion According to the International monetary Fund, the balanced, the Treasury of the Kingdom will be only when the price of a barrel of $85. It is now clear that the income of Saudi Arabia this year will decrease by about $35 billion In mid-March, Riyadh admitted the necessity of cutting the annual budget by 5%. By limiting the production of Saudi sheikhs expect to increase quotes of “black gold” and to minimize their own damage from the coronavirus.
In Russia the idea of the postponement of the summit and the possibility of extending the harvest limitations were discussed at the meeting in the Ministry of energy. Profile the views of officials and heads of oil companies are equally divided, so the final decision was not adopted, but approved. It can be assumed that the tacit support of the postponement of the meeting means that Moscow has defined a position on this matter and ready for nethe review of the terms of the transaction.
Another question is how beneficial the extension of the production limitations of our country? While preserving the quota, the Russian production of “black gold” to the end of the summer will be reduced by 4 million tons, and the total year decline in oil production in our country will exceed 50 million tons (nearly 9%). According to the head of the analytical Department AMarkets Artem Deev, the Russian budget revenues from oil sales in excess of 20% of GDP, so at the current price level of losses of the national economy loom. “Production cuts are not beneficial to any market participant, but in the future it is expected that the terms of the transaction in may-June of the current year will be extended. Most likely, at the next OPEC meeting is proposed to prolong the production decline for another quarter, which will support quotes, which can grow up to $40 per barrel”, — the expert predicts.
meanwhile, even such victims, apparently, will not be sufficient to stabilize prices in the commodities market. “Until now, there is a surplus of raw materials, as the main consumers of aviation, marine and other industries – almost do not work. If countries will not cut production, then in a few weeks we will get a repeat of the April crisis (when the price of a barrel on the exchange went negative), as the market today is sold more oil than they need,” — said the head of Department of the analysis of the data the CEX.IO Broker Yuriy Mazur.
However, the rumors about the postponement of the Ministerial meeting of OPEC+ a little “warmed up” the price of oil: if the last day may of the “black gold” was estimated in $35 a barrel, after it became known about the new date of the summit producing countries, the quotations rose to nearly $40.
