The deal of the century has taken place! - journalist Vasily Alenin announced in his blog, and briefly explained what this event means for Russia:
“The cartel in the oil market re-exists. It seems to be so. Saudi Arabia and Russia have agreed to reduce the production of "black gold" by 4 and 2 million barrels per day. And total OPEC + - at 20 million b / s.
It should be understood that this is from the production levels for today. When the Saudis sharply increased it, but we did not. And it turns out that in relation to the beginning of the year, Russia will become the country with the strongest decline in production in the world.
Checkmate! The largest geopolitical defeat of Putin ... "
Following Alenin clarified the situation along with its background in more detail:
To begin with, Russia, which for 3 years was part of the OPEC + agreement for almost 3 years, practically did not reduce oil production. She played indicators - offset of associated petroleum gas, conversion factors for tons to barrels, etc. All of this understood, the Saudis saw it, but turned a blind eye - they needed a deal and did not need a scandal, which Russia brazenly used. However, the patience of the Saudis was drawing to a close. And everything exploded when Moscow began to act up about the next - absolutely necessary - production restrictions.
The Saudis' revenge was terrible - they sharply increased oil production, displacing Russian oil from all markets and driving Russia into a corner. And she finally agreed to everything that the Saudis demanded. Full surrender.
In fact, Russian oil companies were forced to pay for the tricks of the past 3 years. When they thought the trickiest ...
According to the latest data, the OPEC + deal involves a reduction of 2.5 million barrels per day. Saudi Arabia and Russia. Seems equal amount? But for the Saudis who have sharply increased production, it’s just a return to the levels of March of the current year - before the deal’s disruption ... But for Russia it’s a real decrease of 2.5 million, and now nobody will take into account all the well-known calculated tricks. ..
Although ... They will, of course. The Saudis need victory and a deal. But the Saudis do not need public scandals about Moscow’s non-compliance with the terms of the deal - they can drop the price of oil ... Only ¼ of Russian production will not have enough “tricks”, the Kremlin will have to ensure a real reduction in production and a very strong one.
The United States sharply reduced oil production: from April 28 to March 3, it collapsed by 0.6 million bpd (to 12.4 million). The shale men were forced to stop their rocking (otherwise production would be at a loss). And, of course, the United States blames this for their contribution to maintaining oil prices (however, this, of course, is a significant contribution). But the press Peskov immediately made a statement that the natural decline in US oil production could not be counted as a reduction to stabilize markets. Like, Moscow requires additional restrictions from the USA ...
According to the forecast of the US Energy Information Administration (EIA), production in the United States will fall in 2020 at such prices of 1.2 million bps (up to 11.8 million bps). And in 2021 - another 0.7 million bps.
Count this "natural decline" in production in the States? ..
Mexico and Norway are twisting their tails - they, of course, want oil prices to rise, but so that production restrictions do not affect them ... The Saudis are crushing in every possible way, even trumping it from time to time. Perhaps these countries will be able to "jump off the train" cuts ...
The US can easily impose an embargo on Russian oil exports, as they did with Venezuelan exports. Fortunately, there is a reason now - all Rosneft projects in Venezuela have become Russian state ones. That’s what an idiotic decision - to get Rosneft out of attack, putting in jeopardy the whole country and all the other oil workers!
There are a lot of uncertainties. Anyway, the oil market will be very volatile. Moreover, it is not yet clear with the development of the coronavirus and the final economic losses from the epidemic ... The competition - whoever deceives, fools, corners - continues ... "
Network analyst Anatoly Nesmiyan summed up preliminary and disappointing results for Russia to reach agreements to reduce:
“There is only one explanation: the gray column is the base with which we agreed to count the reduction (red column). The final production is in the blue column.
In fact, Russia is reducing from the current 11.2 million barrels to 8.47 million, losing 2.73 million barrels, Saudi Arabia - from 10.150 (actual production at the end of March) to the same 8.47, losing 1.68 million.
The agreement is valid until June 10, after which quotas will again be revised depending on the situation with demand.
The agreement reached has two nuances. And both are connected with Russia. Russian deposits in the Arctic zone are significantly depleted and flooded. Technological closure, even temporary, will “paraffin” these deposits, and re-printing them can be completely unprofitable. That is - it is possible to stop production, to restore it - is doubtful. When your temperature is around zero outside and permafrost below, this is significantly different from Arabian sands and plus 25 average annual temperatures. But, of course, when in March they proudly slammed the door, they did not think about such trifles. In warm rooms, in general, everything looks a little different than in the field. Especially if you are an infrequent guest there, only to report directly to the president about yet another grand success. The President also does not delve into, and therefore boldly and decisively supports any adventure of his accomplices.
The second nuance - given the catastrophe in which the Russian oil industry inevitably falls with such a serious reduction, the Kremlin may be tempted to deceive partners. But the partners are not Russian pensioners, they will not wipe themselves. If Russia tries to cheat, personal sanctions are possible, especially since 10.2 million barrels of reduction are still less than the minimum necessary level, since the imbalance in the market today is about 20-25 million barrels. A free storage capacity even with a decrease of 10 million will be enough until the end of May. Therefore, the next meeting is scheduled for June 10, and possibly, in case of urgent need, earlier.
Today a meeting of OPEC energy ministers and the Big Twenty will take place. It will mainly deal with issues related to demand, since reducing production is half the battle. Now everything is driven by demand. According to the most optimistic estimates, it can recover up to no more than 90 million barrels. That is - the current reduction in the best case will be a ceiling above which production will not be able to rise in the next two years.
Naturally, everyone is interested in another parameter - the price of oil. And again, with the most unbridled optimism, the maximum estimates so far fluctuate around $ 45 per barrel. This is very small, but now it seems that even at such a price you will have to rejoice like the manna from heaven.
For Russia, the current situation is twofold. Of course, they will not steal less. People will pay for the disaster. This is bad news. The good news is it. There is hope that people, having tightened their belts, will less perceive the slop pouring from the TV ... "
Another analyst, Pavel Vishnevsky, also wondered who would benefit and who would lose from this situation. For example, Rosneft will lose half of export earnings and 30% of production. And here is the rest:
“A reduction of 1.8 - 2.0 million barrels per day means that a company like Lukoil, for example, will have to be closed altogether - it produces 1.6 million barrels per day.
The main winner in the oil war was Trump. The US, being the largest oil importer, is not going to join the deal and will not accept any reduction in production. Mexico refused to join the OPEC + Brilliant multi-path plan, to bend US shale companies failed miserably.
The head of ExxonMobil's shale business unit, Staale Ervika, wrote a letter to Texas regulators saying that regulating state oil production would benefit only competing states and states. The introduction of quotas or a mandatory reduction in production will lead to unforeseen consequences for the state in the interests of the competing states of the USA and other countries. The free market is the most effective means of eliminating the enormous imbalance of supply and demand that we are now facing, ”Staale wrote.
That is, Saudi Arabia, Russia, Norway and others can and should reduce production, while Texas and the United States are not profitable. Checkmate to you kremleoidy.
“A large-scale reduction in demand is unprecedented for the oil markets - such a level of decline has never been before in world history. In the second quarter, this will cost us more than 15% of global oil consumption. The current situation looks extremely gloomy - stringent testing of oil markets will begin on many fronts, ”the OPEC internal document states.
03/06/2020: Russia refuses to reduce oil production by 0.3 million bpd
04/08/2020: Russia agrees to reduce production by 1.6 million bpd
04/08/2020: Russia agrees to reduce production by 2 million bpd
04/09/2020: Russia agreed to reduce production by 2.5 million bpd
USA. - 13 million / bbl per day (end of March)
Saudi Arabia - 12 million / bbl per day (April)
Russia - 11.29 million barrels per day (March)
Canada - 5.78 million barrels per day (February)
Iraq - 4.62 million barrels per day (March)
There is no mechanism for the US government to limit oil production, US Energy Secretary Dan Bruyett said in an interview with Bloomberg TV (Interfax reported). The minister also noted that the lifting of sanctions against Russia was not discussed and added that he plans on Thursday to hold a meeting with colleagues from Canada and Mexico.
Total - in the dry residue. The strategy of the next mnogohodovochki failed miserably.