Biznes Alert (Poland): the battle of Russia and the USA in East-Central Europe may destroy an oil agreement

parties to the agreement from the OPEC+ will make the decision on the reduction of production volume of 600 thousand barrels per day. Current until March 2020 limitations this will give a overall of 1.8 million barrels. For the market this is nothing new. The oil agreement, which was valid until the end of 2018 and was designed to limit the fall in oil prices that began in 2014, provided the same restrictions of the production.

Thus it is possible to speak about intention to return to the situation until 2018. OPEC analysts+ believe that the easing and bringing restrictions to 1.2 million barrels per day only led to a further decline in prices. That, in turn, is crucial for the budgets of oil States, led by Venezuela that live off of the income from the sale of oil and also released to the exchange in 2019 of the company “Saudi Aramco”. Now it has become the most valuable company in the world, ahead of Apple or Google (its cost is estimated at two trillion dollars).

However, the new constraints of production volumes may not be to taste of Russia. It is fulfilling its obligations in this area, but representatives of the oil sector criticized these measures from the moment of their appearance. The head of Rosneft Igor Sechin said at a meeting with Vladimir Putin that his company is 100% fulfills its obligations related to the production cuts, but in General, it only contributes to the expansion of the US oil market. This statement is particularly interesting in the context of the statements by the Americans that they can replace the Russians in the role of suppliers of raw materials to Belarus. If Russia will not be released from the agreement, it would be difficult to respond to the expansion of Americans in the Easternabout-Central Europe. Thanks to the oil concern “Orlen” and Group “Lotus” were already present in the region and to strengthen its position in the measure in which allow technological limitations of the Belarusian infrastructure, adapted for the use of the Russian oil brand “Urals”.

Cartel OPEC predicts that in the last quarter of 2020 the United States will be released on record production, reaching of 20.21 million barrels per day, despite the fact that the volume of domestic demand is 21,34 million barrels. In General, the increase of the supply volume producers, non-OPEC production in 2020 will reach 2.35 million barrels (in 2019, the figure was 1.86 million barrels). He will contribute to a favourable monetary policy and the improved situation on the financial markets. This data can be key for the oil agreement, which, by design, was intended to lead to an increase in oil prices, but indirectly helped to increase the profitability of production rivals OPEC, in particular, American manufacturers. They have access to most modern technologies that allow them to reduce the cost of production, and can increase the number of wells, without asking for permission from Washington. This is the difference between the free market and the economy with centralized planning in the oil sector.

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manufacturers, Such as Russia, faced with a dilemma. They need to decide what to do: continue to brake falling prices with the help of oil agreements or to engage in a price war to regain market share with discounts. American manufacturers, which does not limit political control, not even thinking about it and produce as much raw as you can. Rosneft, apparently, see that in current circumstances there is no place for high oil prices.

it Should be recalled that the Russian budget by 2020 drawn up, based on the price at 42.4 per barrel, or more than 10 dollars less than the price of a barrel of oil brand “Brent” (it is now about $ 55). The Russians are ready to join with the Americans in price competition. The question, however, is whether they will decide to destroy the oil agreement. The decision will be taken at the March meeting of OPEC+, which should be carefully monitored not only the oil sheiks, but also to the experts, who are Eastern politics.

the new York times contain estimates of the solely foreign media and do not reflect the views of the editorial Board of the new York times.