the Price of Russian Urals oil on the world market exceeded quotations of North sea Brent crude, which is considered the standard market of “black gold”. My role in this pricing anomaly of the part played Moscow in the transaction OPEC+ to limit production volumes and reduction of production of raw materials in the United States and Venezuela. Until the end of the year prices may stabilize at $50 per barrel, which will satisfy the needs of the Federal budget, but won’t save Russian Treasury from a deficit.
Traditionally, Russian grade Urals lagged price of Brent for a few dollars. But at the end of June the situation changed dramatically. The exceeding of quotations of Russian grade over the cost of benchmark Brent crude is determined by three main factors. First, Russia’s agreement with OPEC+ significantly reduced the production of liquid hydrocarbons and brought the production to the lowest level since 2002. As a result, the global energy market is a deficit of high-sulphur raw materials, so its cost has been dramatically increased. Second, in connection with new us sanctions against Venezuela, which hold in the sea nearly two dozen tankers of this country do not allow to deliver consumers with more than 18 million barrels of “black gold”, many importers increased their purchases of fuel from Russia, what gave additional impetus to price rise. Third, the us shale producers due to the fall in demand triggered by a pandemic of coronavirus, since March, have cut production by 2 million barrels per day and the eyeballs filled the vault of “black gold”. In the end, the price of Russian Urals exceeded $43, quotes of North sea Brent remained at $40-41.
on the one hand, the high price of raw materials give Russia a certain advantage before other participants of the oil market, where there is a rule: it is better to sell one barrel for $50, rather than two for $25. On the other hand, reducing exports, our country is losing its position in the world market of “black gold”. According to experts Reuters, the growth of quotations of Urals forcing owners of European refineries to reduce the purchase of Russian hydrocarbons in favor of alternative counterparts, including American Brent or WTI, which now cost win in the competition. If earlier the traditional buyers of Urals has repeatedly faced with a sharp rise in price of Russian varieties, and tried to wait out high prices, but now it is more profitable to reconfigure the equipment under light fraction of “black gold” and save on future purchases of raw materials.
According to financial analyst CC “Finam” Sergey Drozdova, at present price situation of “black gold” is at a crossroads. On the one hand, as the lifting of the quarantine in the world IU�� will revive the industry, transportation — therefore, increasing the demand for “black gold”. Many expect the impact of the second wave of coronavirus, which again could plunge the economy into suspended animation. Accordingly, the prerequisites for the growth of oil prices for Urals depend on which scenario is implemented.
However, to expect that in the future the price of Urals will delight prices exceeding world analogues, it is not necessary. “Brent is the benchmark grade of quality oil, which is traded on the London stock exchange since the mid 1970-ies. From it begins the system of price coordinates. Historically, the value of Russian brands was always below 5-10%”, — explains the head of IAC “Alpari” Alexander Razuvaev.
a Positive impact on the price of Urals may have a decrease in the production of American companies — according to the US Department of energy, a record decline in the number of active rigs, observed the last four months, in danger of losing up to a third of shale raw material, through which Washington tries to dominate the world oil production. More than 15 major commodities holdings of the country have cut their budgets for development of new fields on average 50%. In the next two years, the United States awaits the inevitable production cuts.
“Brent Quotes to the end of the year able to exceed $50, although the price of Urals will be somewhat lower. The budget deficit of our country, calculated on the basis of oil prices at around $41-43, will be offset. However, to completely avoid losses of the Russian GDP, which is estimated at 5-10%, will not work”, says Drozdov.
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