Rare unanimity, which showed that almost all participants in the negotiations, not by chance. Common to all tasks determined by the head of the energy Ministry of Russia Alexander Novak, saying that restoring the stability of the energy market and energy security are key in solving problems related to health and well-being of people and the further worsening of the crisis in the energy sector will entail serious socio-economic consequences.
Putin met with the crown Prince of Saudi Arabia’s oil production decline
the Crushing drop in oil prices over 2 months of almost 60% to today’s values in the 25 to 32 dollars per barrel, which has forced many countries to doubt their own abilities alone to survive the economic crisis caused by the epidemic of coronavirus in the world and measures to counter it. Numerous controversies have faded into insignificance before the threat of rolling up the entire world economy first, the crisis, and then in a long period of stagnation.
Naturally, the agreement raises many questions. One of the main: was it possible to avoid such a serious reduction of production in our country in may and June, 23% from the production level of 11 million barrels per day, that is 2.5 million barrels per day. Especially if we remember that in early March, Russia has not gone on General – all members of OPEC, a reduction of 1.5 million barrels a day, where its additional quota to the existing 300 thousand barrels, would have been only about 300 thousand barrels. According to experts, to reduce production to 10 million barrels per day would have anyway, otherwise it would lead to a drop in oil prices to $ 10, maybe lower. Against the backdrop of falling demand for “black gold” oil storage is already filled to 70%. If the current rate of production in a few months unclaimed in the market of oil would be nowhere to store that finally would have fallen quotations.
Putin and trump discussed the situation in the oil market and the fight against coronavirus
“because of the expansion of the pandemic in the world market situation changed very rapidly and unpredictably. What seemed impossible and redundant at the beginning of March, was insufficient at the beginning of April,” – said the head of the national energy security Fund Konstantin Simonov. In his opinion, despite the very different assessment of the abundance of oil on the market currently, on average, in 2020 it will be about 10 million barrels a day. That is, the same volume of oil, who planned to remove from trade OPEC members+. Such a surplus of oil in the end would lead to the widespread collapse of production of “black gold”, including in Russia by 20-25%, and it would have happened in a very unfavorable macroeconomic conditions, with minimal quotations of the barrel. “Now, thanks to the adjustable production cuts, there is hope that oil prices will remain appropriate for the country level, at least above $ 30 per barrel,” – said Simonov.
as for quotas of Russia, it corresponds to its share in the global market and it is pointless to argue. Exactly the same reduction from the OPEC countries is Saudi Arabia. Both countries were previously the main driver of reduced production. Moreover, given the greater than Russia, the dependence of the Kingdom’s budget from oil revenues, the decline in production will be to Riyadh is much more painful than the domestic economy.
“the Decline in our country will be substantial, in 2020, 60-70 million tons. In terms of production we rolled about 15 years ago. But even in the current century we had the level and less, so to do this TrAGEDI not necessary”,- said Konstantin Simonov.
the Reduction in the United States may be even greater because the cost of many – especially shale – mining projects here is much higher. Already today the natural decline of oil production in USA is estimated at 2 million barrels a day. In the future, is expected to increase this figure to 4 million barrels per day.
Mexico agreed to cut oil production at 100 thousand barrels per day
a New deal on OPEC+ is enclosed in record time – until may 1, 2022. And July 2020, the total reduction will be reduced first to 8 million barrels per day, and from the beginning of 2021 to 6 million barrels per day. This long term agreement is not accidental. This will create a positive informational background in the oil market and will make it clear to the participants that oil producing countries are willing to cooperate with each other despite their differences. In addition, the uncertainty of the pandemic remains unknown when the virus will cease to affect the demand for oil in the world. Everything here is more dependent on the progress of medicine than from the economy, but to try to minimize the impact of the epidemic on the oil market is quite capable parties to the transaction.
“it is Important to see the situation in dynamics. After two or three months, the epidemic will decline and demand will begin to recover,” – says the analyst of “Finam” Alexey Kalachev. From his point of view, the gradual decline will intersect with a gradual increase in demand, which should result in the return of prices to pre-crisis levels.
it is Possible to assume that the effects of this decline in production will be very painful for the oil and gas industry. But as they say, you have to choose the lesser of two evils. “While neizvestenon whether there is a real opportunity to reduce the losses of the Russian oil production at such a large size with possibility of its subsequent recovery,” – said Alexey Kalachev. He suggested that perhaps instead of conservation of the wells will be limited to reducing the intensity of oil extraction. The obligations on reduction of oil production will call into question the need for investment in the development of tight oil and Arctic oil.
From the point of view of Konstantin Simonov in the first place “under the knife” will go new, unstarted projects, and save prey will try at the fields, which can save a variety of tax benefits.
oil and Gas companies for three months isolated in the fields
to be Affected and related industries. For example, many companies can reduce investments in gas production and processing projects, especially taking into account that “blue fuel” there is also a record decline in world demand.
“now to Increase the production of gas is all that early to fill fire with gasoline. Such a path has already gone to Saudi Arabia, which in the conditions of falling of demand for oil aggressively increased production. What it led to, we see,” – said Konstantin Simonov. In his opinion, you can also expect a temporary stay or postponement of the launch of many domestic industries and for liquefied natural gas (LNG), which have now become too expensive to implement. In addition, LNG is also being subjected to problems with the prices and market demand. Back to promising but very costly projects in the oil and gas industries will succeed only after the elimination of all consequences of the epidemic of the coronavirus to the world economy and the return of oil prices on comfortable for our country Uroven. At least above $ 40 per barrel, said Simonov.