oil prices in recent months barely had time to stabilize at just above $40 per barrel, once again at risk of serious collapse. The reason could be the dumping of the Saudi Arabia sheikhs intention to reduce the prices of exported raw materials. Such a step, Riyadh forced to go to Angola and Nigeria, which do not comply with the terms of the agreement OPEC+ on limiting production.
Experts warn that if the Saudis will go to the end and really carry out the threat, the cost of a barrel will fall again to zero, and Russia’s hopes to get rid of the income deficit of the Federal budget will be impossible.
the Threat of a collapse in oil prices occurred after the statement of the Minister of energy of Saudi Arabia Prince Abdul Aziz bin Salman, who accused Angola and Nigeria in breach of agreements to reduce production of “black gold” OPEC made+ in April of this year. According to representatives of Riyadh, both African countries during the OPEC conference, June 18, failed to convince other participants of the transaction in meeting performance standards, so Saudi Arabia has the full right to sell oil at a reduced price.
Recall that the new agreement, OPEC+, introduced in may, called for the reduction in the production of “black gold” all members of the Alliance to 9.7 million barrels per day. Later, the parameters of the deal had been extended until the end of July. While Russia and Saudi Arabia pledged to reduce its production by 2.5 million barrels a day.
experts believe that the Saudi princes are telling the whole story, venting their discontent solely on Angola and Nigeria. Almost all of the country delegates involved in the transaction OPEC+, in varying degrees, have not fulfilled their obligations. According to the June report of the International energy Agency, the Saudis have promised 100%, but Russia, as confirmed by Minister of energy of Russia Alexander Novak, was able to emerge only at the level of approximately 94-95% of the promised volume production cuts.
However, these examples cannot be called a record among the “left behind” there are other “losers” that Riyadh may also present their claims. In particular, Gabon has reduced the production of raw materials only 40% of the granted quotas, and production of hydrocarbons in Iraq had dropped to less than 50% of the promised country regulations.
Experts believe that the threat to Saudi Arabia can indeed lead to a drop in oil prices to a negative value — like prices in the global market have seen at the end of April, when the Saudis dumped on the market millions of cheap barrels. “The confrontation of the largest producers then brought down the price of key EnergonSitel, — said the head of Department of the analysis of the data the CEX.IO Broker Yuriy Mazur. — If Saudi Arabia will again manipulate the price of oil Brent will fall first to $32-35, and then could fall to $15”.
“Some of the cartel members do not fulfill the conditions of the last deal, as he is not able to fulfill the technical conditions to preserve the well is costly and expensive. Others simply provide distorted statistics. The Saudis in such circumstances has no levers of influence on offenders, and can only threaten a price war. However, while all is on the level of verbal threats, which will be difficult: the world’s storage is full, oil tankers are laid up and can’t unload in ports”, — said the head of information and analytical content “BCS” Vasiliy Karpunin.
“a New price war by Saudi Arabia will not bring anything good to anyone, — considers the head of analytical Department AMarkets Artem Deev. Quotes fall: middle Eastern oil will flow to Europe and Asia, where all the stores are already filled, and the ports are oil tankers, of which raw materials have nowhere to drain. Quotes can be reduced simultaneously for all grades — for $3-5 per barrel. Further reduction will depend on technical issues (filling of storage) and statistics (demand growth, reducing their drilling in the US and lower production in other countries). Global prices may affect the second wave of the pandemic coronavirus, which will lead to a new fall in energy consumption. This is of concern to all international traders. Oil prices while balancing on a stable level, but at any moment they can go to collapse”.
the Expert sees the key problem is that the OPEC Alliance+ has long outlived its usefulness, the promise of lower production is only a recommendation. The participants in the transaction regularly violate the terms of agreement and manipulated data. As for Russia, the new decrease in quotations due to the price war from Saudi Arabia will further reduce the amount of oil revenue our state. In January-April revenues of national budget from oil exports fell by nearly 24%, despite the fact that the physical volume of shipments of “black gold” decreased by only 2.3%. “The restoration of the revenues of the Federal budget that is already, according to various estimates, this year will be reduced by 5-10%, will need more than a five-year plan”, — concludes the Deev.