the Oil market is, by definition, a number of Western analysts, went through the worst week in its history. Never been to the exchange price of a barrel left in a minus, but in the night from 20 to 21 April, it happened. The efforts of 23 producing countries, including Russia, the signing in early April, the new deal OPEC+, went to pieces. Despite the agreement to reduce production of “black gold”, which is now in a world lacking in abundance, the prices of raw materials continue to fall: Brent crude oil, as before the new agreement, OPEC+ is estimated at less than $20. May and June futures contracts has reached the negative zone: raw material traders in a hurry to get rid of the unnecessary barrel rolls, because retention is much more expensive than you can get for selling them. This situation can lead to heavy losses for the Russian economy. The budgeted oil price of $42-43 per barrel seem vague, but the fall in the value of “black gold” below $10 a barrel no one seems fantastic.
the Russian Urals this week have already punched down the level of $10 per barrel. In the Kremlin are assured that for our country raw Apocalypse is possible, as the authorities have reserves to minimize negative effects on the economy. To cover the lack of funds to help Fund national security (NWF), which, according to the forecast of Minister of Finance Anton Siluanov, should be enough for 3-4 years, because there has accumulated more than 12 trillion rubles. However, independent experts warn that if the era is low in oil prices drags on, the government “pod” will be empty much faster.
to Cheat will be all
There is a basic card game. You can play more decks. The player rolls ten cards and says that they are all “seven”. Of course, the stated number of cards such dignity of bribery and does not smell, but his opponent according to the rules, we have to choose to only check one — if we get “seven”, you have to take the bribe and to lose in the end.
the Deal between oil-producing countries to limit production of raw materials, concluded in early April after a difficult and controversial negotiations, demonstrates that consensus on the commodities market of the world doesn’t exist: everyone is struggling. First and foremost, for their own interests. The players swear to fulfill stated conditions, but adhere to their own benefit.
what we agreed 23 the extractive state? During may-June the country’s solidarity reduce the production by 10 million barrels a day. Then, from July to December, their total production falls to 8 million barrels, as of January 2021 and until the end of April 2022 6 million per day. Other oil-producing countries, previously not formally part of OPEC+, for example��EP, USA, Canada and Norway to support a diving barrel, promise to remove from the market another 5 million “barrels”.
do Not assume that in each quarter of the manufacturers will release importers from additional oil resources. The volume of cuts will be compared with the production, which was accrued in the first quarter of 2020. In other words, every quarter the production will slightly grow, not fall.
Considering that April 1 has ceased to operate old Memorandum-OPEC+ on the reduction of hydrocarbon production, Saudi Arabia has significantly increased oil production. In an effort to minimize their own losses from the reduction of production capacities, Riyadh in the first quarter of this year, as was stipulated in the previous agreement OPEC+, every day produced 9.8 million “barrels”. However, in April, after the rupture of the Memorandum, the Saudis increased production to 12 million barrels. And now, by cutting production at 2.5 million barrels a day (that follows already from the new agreement), Riyadh almost loses — in fact, a middle Eastern country gets its production to pre-crisis levels. But Russia, which after breaking previous agreements OPEC+ maintained daily production unchanged at 11.3 million barrels, agreed to cut their oil fields (without condensation) 1.8 million “barrels”. Adding the condensed hydrocarbon product, reducing the production of domestic oil companies will be 2.5 million barrels daily. Thus, some of the countries participating will have to really “turn off” the well, and someone get off the paper manipulation of the figures.
“There are suspicions that cheat will be all — notes senior analyst “BKS the Prime Minister” Sergey Suverov. — there was an information that since mid-April, several Russian oil companies have increased production by nearly 1%. Similar data are likely to come from abroad — from countries in the Middle East or from countries beyond the Atlantic ocean. To verify the accuracy of such information will be extremely difficult.” Analyst fears that confirm the veracity of the technical details of production and supplies of hydrocarbons will be virtually impossible, and will use unscrupulous energy producers. As a result, there is a danger that the market will not feel any reduction in the supplies and barrel will continue its non-stop flight in pricing the abyss.
an Unexpected winner in the price war
the Problem is that the oil – until recently the main energy resource of mankind – no longer needed. Similar conclusions can be drawn from the fresh reports from OPEC and the International energy Agency (IEA). According to their forecasts, the planet already in the near future will face the strongest in the history of the fall of energy demand. The oil cartel predicts a reduction in daily consumption of 20 million barrels in April and 12 million in the second quarter of this year. IEA predicts a reduction of approximately 30 million and 23 million barrels, respectively.
the Reason for the decline in interest in the import of hydrocarbons from countries that previously showed the broad interest in supply of energy lies on the surface: coronavirus, figuratively speaking, was laid on the hospital bed the entire global economy. And while it’s on pause, it does not need the raw resources for development.
How to break off such relations can be clearly seen on the example of Russia and China. According to adviser of Institute of modern development Nikita Maslennikov, the coronavirus is actually tightly interrupted Russian-Chinese trade relations. Until the last moment, both countries were considered as one of the largest export-import global producers and consumers of goods. Beijing framed another polnocy Russia — China considerably reduced the turnover of energy to intermediary countries, which supplied many producers of Central Asia with cheap raw materials. Decreased mainly purchases from our country. In the beginning of the year, according to the Federal customs service, Russian oil deliveries to China fell nearly 30% or about $800 million than a year earlier, while exports of petroleum products declined from $570 million to $460 million.
However, China, which came coronavirus infection, is not in place and benefits from large-scale, in fact global disaster. On the background of the epidemic and the collapse of prices for “black gold”, Beijing began to buy raw materials in its strategic reserve. In the first quarter, the level of procurement of China has doubled. For three months, China purchased more than 10 million barrels a day and got myself about 4 million thus, China, as the world’s largest importer of oil, has managed to win the price war unleashed in the early spring of Saudi Arabia and Russia, though did not take in this clash of subject participation.
the Well is covered with paraffin
Experts leave open the possibility of increase in oil prices to $35-40 per barrel to the end of the year. However, they focus on the problem of demand, which remains open. Despite the announced reduction in production at 15 million “barrels”, world consumption is literally awash in excess of “black gold” — about 10-15 million barrels produced the largest producers of raw materials, daily remain unclaimed.
currently, the oil under the string overflows the existing store and tankers, and by early may all of the available capacity reserves would be no longer able to accept additional aboutbjami raw materials, so the “black gold” will have to simply pour it or throw it away in barrels in the waste pits or even to pay for its disposal. In fact, such measures mining companies have to go now. In the night from 20 to 21 April, the us variety of WTI crude oil has experienced a record in the history of the fall in value — the price of a barrel fell to negative values (which in fact means the fee for storage). It was the first time in a hundred years — below $1 dollar the price of a barrel has not failed since the beginning of the 1930s.
However, experts believe that the ordinary consumers of such misadventures “black gold” is not worth paying attention to. It is the work of speculators, I’m sure Director of the energy development Fund Sergey Pikin, which are global crisis for their own enrichment. “The sale of raw materials at such a low price are not selling physical oil. It is only exchange-traded instruments through which speculators are making money on the scandalous situation in the primary sector of the planet. The price war that emerged between Saudi Arabia and Russia in the oil market, attracted the attention of speculators who saw opportunities to earn extra money at the drop of a barrel. Such problems would not have arisen if Moscow and Riyadh agreed on production cuts a month earlier”, — says the expert.
“the Modern oil industry requires serious rehabilitation, — says Sergey Suverov. — Update necessary to carry out both a technical and psychological point of view.” And it requires a fairly fundamental decisions relating to a further decline in production, as well as temporary and even full conservation of the wells. Moreover, the Russian producers in this case are at risk to suffer more than their colleagues-competitors from the USA or Saudi Arabia. Stop the actions of domestic wells threatens to lead to their complete loss in the Northern oil fields drilling systems can freeze or be covered with paraffin, which will reduce to zero the possibility of reopening the mine. On the fields of the Middle East, and in the case of shale industries of America to reduce production enough to just stop the drilling and Russian oil production requires much more recovery time and financial costs.
“the Russian economy is currently faced with a serious challenge. At the same time there is a sharp fall in world energy prices, almost double the decline in our exports of oil by OPEC deal+ stop activities due to non-working months, the gap of commercial supply chains and sales, increased spending to fight the pandemic,” warns main analyst of “Broker” MARK real.
no enough money
What are the losses in the Russian economy and Federal budget from falling in price through the floor oil? While it is possible to operate the preliminary figures. For the first quarter of 2020, the total export from Russia decreased by 14% compared to the first three months of the previous year. “Non-oil exports remained stable at around $40 billion versus $39 billion a year ago, says head of information and analytical center “Alpari” Alexander Razuvaev. — Almost halved the supply of pipeline gas — from $14.1 billion to $7.1 billion to Say that Russia is heavily dependent on raw material anymore, but falling revenues from oil exports highly expensive. Imports to Russia remain unchanged at $55 billion, but in coming quarters it will be significantly reduced, as it will affect the weakening of the ruble and the General decline of domestic demand. I hope that “Nord stream-2″ will finish this year”.
the Expert believes that this year, nuclear power engineering, defense industry, Russian FINTECH and agriculture will support Russian exports, and a weak ruble will have on these industries of further assistance.
in addition, the disposal of the government – high reserves, nearly 12 trillion rubles in the national welfare Fund. The current and most likely next year will definitely be enough in order to ride out low energy prices. Moreover, the internal and external debt of the Russian Federation have small default on the 1998 model will not be exact. Import becomes more expensive, demand is weak, in the end, the country’s trade balance will be positive.
an Ongoing problem for the growth of the Russian economy are low real incomes of the population. Apparent reason for the growth will not be this year, not high enough for consumer demand will be painted in the minor to their expectations for quality development. But to blame only one cheap oil is not necessary: income in previous years fell in Russia and at$ 60 a barrel.
don’t need to be a famous economist to understand: the year 2020 will be very difficult for Russia and the world economy as a whole. It will be good if Goldman Sachs is right in his forecasts and the global economy will start recovering in the third quarter. This will give Russia and other producing States a chance to let slow and gradual, but still a recovery in demand. By 2021, according to analysts Goldman Sachs, oil prices could reach $52.5 per barrel. However, the price of oil is fundamental to the budget, not the economy as a whole. The economy is more important demand and business activity. Will be a good result, if at the end of 2020, GDP will not exceed 4-5%.
Well, what next? Again let’s hope for expensive oil – more is not what. “At the present time there is a comparison that oil on��azalas was cheaper than fresh water. Indeed it is, says Sergey Suverov. — To us remains nothing, at least in the near future, but to remain faithful to the “black gold”, although the hope of the hydrocarbons has let down our economy.”
oil Production by the world leaders of the energy industry ( to the new agreement, OPEC+):
Country Production (in million barrels per day):
1. USA 15,0
2. Saudi Arabia 12,0
3. Russia 10,8
4. Iraq 4,45
5. Iran 3,99
6. China of 3.98
7. Canada 3,66
8. UAE 3.1
9. Kuwait 2,9
10. Brazil 2,5