on the Eve of an emergency OPEC meeting emerged a rather optimistic news, which gives reason to assume that the outcome will be successful. Russia, until recently, did not agree to limit production, said about possible production cuts. Sources close to the government reported that our country is prepared to cut capacity by 1.6 million barrels per day or 14% from the first quarter of 2020. However, such concessions to Moscow will go only under the condition similar to the reduction of production — on the same 14% — other oil powers.
As suggested by a senior analyst “BCS Premier” Sergei Suverov, it is possible that the meeting will be fruitful and the parties make a positive decision. “Everyone understands that the stakes are very high. Saudi Arabia’s budget is calculated on the basis of $70-80 per barrel. Although Riyadh is putting pressure on Russia, the Saudis, the current prices are not satisfied. The General decline in production can be called a victory for our country, as the quotes will rise to $40 that will almost match the cost of the raw materials incorporated in our budget”, — the expert believes.
But still too early to get excited. Each manufacturer has personal goals that may not lead them to consensus. “For most is the preservation of the inflow of money into the Treasury from the sale of energy. If it will make a more efficient competitor, it will be definitely done,” expresses the opinion of the IAC senior analyst “Alpari” Anna Bodrov.
According to her, if the agreement will not be reached, each of the miners will pump oil in accordance with their priorities. Then the current excess raw materials in the amount of 18 million “barrels” per day to fly will expand to 20-22 million barrels that will drop the price of Brent to $20, and possibly below. Russian Urals, which is now worth $17, risks to fall to $13. This situation will deal a very painful blow to our budget and will strengthen the ruble devaluation.
Until the end of 2020, Russia’s budget deficit had planned EAn at 1% of GDP in 2019 of its surplus reached 5%. The amount of savings in the national welfare Fund is more than 11% of GDP. Probably due to these tools, another escalation of the crisis, we will survive — increased social obligations to the citizens will be fulfilled. “However, today Russia is confronting a new reality: the APR we have hours, so a significant drop in GDP in 2020, we are guaranteed, says Bodrov. — Not to fall deeper, to strive to win back the price of at least more or less comfortable level of $40. Then the Federal budget can confidently make ends meet”.
Experts believe that the success of the negotiations OPEC+ will largely depend on participation in the new deal producing countries previously remained aloof from the constraints of production, and, in the first place,ü the willingness to make concessions to the US, which until recently gave contradictory statements about his adherence to the Alliance. As suggested by the sovereign, perhaps the situation will become clearer after a meeting of energy Ministers of the G20 scheduled for April 10. “However, of reducing production by 10 million barrels, which the producers say now, will still be enough and soon prices may again fall to a catastrophic $20” — does not preclude the analyst.
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