Dmitry Koptev: "The time of the Russian" oil era" has not passed yet. And it will not pass..."

He compared Biden with a Christian missionary, explained who the outcasts Venezuela and Iran had become for the Russian oil industry, and questioned the effectiveness of the Russian benchmark.

Yekaterina Maksimova

- Data on Russia's share in the global oil market until February 2022, oddly enough, vary. So what was she like?

-Different sources give different figures. According to experts from Fitch Ratings, Russia's share in the oil market before the start of the NWO was about 10%. JPMorgan gives a different figure - 8.4%. In any case, Russia's place in the market was so prominent that the disappearance, even for a short time, of such a player could not but lead to an imbalance in the entire system of world oil supplies.

- OPEC has been talking about increasing production in recent years, but the current production of the member countries of the organization is at a minimum. Possible shortage of oil?

-According to the International Energy Agency, in June, world oil production rose by 690 thousand barrels per day, to 99.5 million barrels per day. In Russia, the growth was generally 4.7% - from 1.395 million tons to 1.461 million tons. True, TASS, which reported this, referred to unofficial sources, because official statistics are closed.

The movement of oil quotes, which have been in a downtrend for a month now, does not indicate a shortage, but the opposite - the players are convinced that, despite all attempts by the West to limit Russia's ability to sell oil, Russian raw materials continue to enter the market. The geography of deliveries has changed - now Asian countries are becoming the main customers. But this is just a matter of logistics, which, as it turned out, is quite simple to resolve.

-Estimate the US macroeconomic benefit from reduced supplies from Russia.

- In June, oil exports from the US reached their highest level since the 1950s. But this is only 389 thousand barrels per day, most of which was bought by Canada. For comparison, the smallest producer among the OPEC countries, Ecuador, supplied the market with 354 thousand barrels per day in the same June.

The decision to abandon Russian oil was purely political and brought the United States more inconvenience than benefit - as the world's largest consumer of oil, America suffers more than others from high commodity prices. Dissatisfaction with expensive gasoline has reached the point where voters will not understand the intricacies of international politics, and in the midterm elections in November they will vote for the Republicans, depriving the Democrats of the majority in Congress.

-Is the setting of marginal prices for Russian oil just a policy and does not concern business?

- This is a purely political story, the purpose of which is to make our country poorer. So far, as far as can be judged, things are progressing with a creak. Last week, it was reported that US administration officials are holding daily meetings with market participants - both buyers and producers of oil. It was also reported that negotiations would be intensified.

There is no doubt that the topic of limiting the price of Russian oil was raised during Joe Biden's visit to Riyadh. Saudi Arabia, as the largest oil producer, is not interested in falling prices for its main commodity - and if the United States manages to get its way, this will inevitably happen.

The Saudis are already forced to cut prices for their Arab Medium and Arab Heavy grades, which are similar in their characteristics to the Russian Urals. A further drop in prices does not suit them at all. So for the time being, we can state that the US attempts to reduce the price of Russian oil to the declared $40-60 per barrel have not been successful.

- Yes, Biden's Middle East tour was not successful. What is your prediction of how the Saudis will behave in the future? Saudi Arabia in the future will increase production?

- As I said, one of the purposes of his visit, in my opinion, was to persuade the Arabs to support the idea of limiting the price of Russian oil. Judging by the fact that there is not a word about this in official press releases, the attempt failed. If any progress had been made in this regard, it would certainly have been reported.

I judge this by the fact that the White House issued a separate release, where he spoke about the "dizzying" success - the KSA's promise to increase by 50% the planned increase in production in July and August. In fact, we are talking here only about an additional 85 thousand barrels per day - the world market will not even notice such volumes.

This, incidentally, to the question of whether Saudi Arabia will increase production. No, it will not increase, it simply does not have the technical capabilities for this. The figure of 13 million barrels per day has already sounded repeatedly, this is the plan for 2027. Therefore, I think it is premature to make any forecasts about how this oil will compete with Russian oil. The only thing I would like to say is that Russia exports about 4.5 million barrels per day. The Saudis promise in five years to produce 2 million barrels per day more than now. Then judge for yourself.

I saw a very apt characterization of Biden's behavior - he was compared to a Christian missionary who is trying to convert the pagans to his faith. In foreign policy, he invites the Arabs to fight Iran, China and Russia. Iran is still back and forth, in the Arab world they do not like it. But China and Russia are the main buyer and the main ally in OPEC +... This does not climb into any gates. In the economy, Biden calls for participation in lowering oil prices - why is Riyadh? It is not surprising that such alien values were not close to the Saudi princes.

-Venezuela and Iran - who are they to us now? Allies? Competitors? Assess the growth potential of oil supply from Iran.

-Both. Strategically, of course, allies. But friendship is friendship, and tobacco apart. If the United States lifts sanctions on Venezuela and Iran, these countries will not think about Russia's interests in the markets they gain access to. Even now, Iranian oil is a direct competitor to Russian oil in Asian markets.

As for the potential for growth in supply from Iran, at the moment, it seems to me that it is equal to zero. Back in April, Iranian Oil Minister Javad Oji said that oil production in the country had reached the pre-sanction level of 3.8 million barrels per day. Yes, at its peak in the mid-1970s, even under the Shah, Iran produced 6.1 million barrels per day. But since then, production has steadily declined. Now Iran does not have the opportunity to radically increase it (although from time to time it claims the opposite).

And more about Iran. In the future, this country can become a real market partner for us. To do this, it is necessary to arrange oil supplies along the North-South corridor, the development of which Vladimir Putin spoke about at the recent Caspian summit.

The main deposits of Iran are located in the south of the country, in the Persian Gulf. And most refineries are in the north. Hence the constant interruptions in the supply of gasoline in Iran, which surprise non-specialists. Russia could supply oil by tankers to the Caspian port of Neka, in return receiving a similar volume of oil in the Persian Gulf, from where it is within easy reach of our key markets of China and India. However, for this it is necessary to modernize the port infrastructure of Astrakhan and Makhachkala so that they can serve as transshipment points along this route.

- Russia was decided to be punished with energy sanctions, but at the same time, Europe is now stocking up on Russian oil to the maximum. Tanker traffic has doubled. How long does the eurozone have enough reserves?

- This speaks not so much of duplicity, but of the practicality of Europeans. Since the sixth package of EU sanctions provides for the refusal of Russian oil only from January 2023, and from oil products - from March, European consumers perceive this as permission right now to buy hydrocarbons from Russia in unlimited quantities. Since our country offers an attractive discount, it is quite difficult to compete with it in the market, which both parties willingly use.

As for how long the Eurozone will have enough reserves, it must be taken into account that Europe does not have such storage capacities that, for example, the United States or Japan have with their strategic reserves. EU rules require countries to have 90 days of consumption in stock. They have them, Europe does not have the ability to quickly create a reserve of a larger capacity.

-Limitation and termination of Russian oil supplies to Europe - evaluate the consequences for Russia, the global oil market and directly for Europe .

- For Russia, this is the lengthening and rise in the cost of supply chains and the forced need to sell their oil at a discount of up to 30%.

The global oil market is organized on the principle of communicating vessels. The main thing is that the total volume of liquid remains unchanged. The oil that Russia cannot sell to the US and Europe is being sold in Asia. In return, those suppliers that our country has ousted from Asian markets are transporting their oil to Europe and America.

The only noticeable consequence for the world market is the rise in prices. And now it is not clear whether it will be of a long-term nature or the cost of raw materials, which is currently fluctuating around $100 per barrel, will again go down. And, accordingly, for Europe, the only consequence is that it is forced to pay more for raw materials for its refineries, which, through the price of motor fuel, drags everything else up.

-Russian oil at a discount - which countries will continue to buy it and how much Russia is losing on this. China nearly doubled its purchases to 1.13 million barrels a day. India too. How long can this last and what could affect the reduction in our oil supplies to Asia?

- It can go on indefinitely. If you have already decided to sell your product at a discount, then it is quite difficult to refuse it, because the market is full of sellers with a much more advantageous geographical position, who can deliver their oil to the same India and China with lower logistics costs.

Several factors could influence cuts in our oil supplies to India. The first is the willingness of traditional suppliers to offer competitive prices compared to Russian ones. So far, there is no such readiness.

The second is Russia's desire to bring the price of its oil to a "fair" level. So far, no such desire has been observed. Finally, the third is prohibitive measures in relation to sea transportation of Russian oil. Hypothetically, one can talk about them, but there are no practical steps in this direction yet, although due to sanctions, the cost of insuring tankers with Russian oil has skyrocketed to unthinkable levels - over $1 million per ship. However, we see that transportation continues.

-Russian oil benchmark - is it possible for Russia to form a full-fledged market mechanism? What difficulties should be taken into account by the authors of the idea, which is now being actively discussed.

- On the one hand, Russian oil has all the prerequisites to become an indicative grade, first of all, the volumes in which it is supplied to the world market and the stability of the composition.

On the other hand, despite this, two previous attempts to create their own benchmark - I'm talking about REBCO, which they tried to launch trading on the New York Stock Exchange, and an attempt to trade Urals futures on the St. Petersburg Stock Exchange - failed miserably.

As they say, you can lead a horse to the river, but you cannot make him drink. You can launch any instrument, but you cannot force investors to buy it. Therefore, the main thing to consider in the third attempt is how to attract buyers. I am afraid that in the current realities this mission is impossible.

-What will happen to oil prices in the short and long term, when the situation on the market has changed so much?

-To predict the price of assets in general is a thankless task, and in conditions of such instability it is doubly thankless. I refrain from making predictions.

-Who is the main beneficiary in the event of a reduction in Russian oil production? Has the time of the Russian “oil age” passed?

-Surprisingly, main beneficiary - First of all, Russia itself. It is estimated that the optimal level of production for our country is 8.5 million barrels per day. It achieves the best price-to-cost ratio. Naturally, if our country seriously and for a long time reduces oil production, other sellers will also benefit from this - after all, prices will inevitably rise in this situation.

And the time of the Russian oil era - no, it has not passed. And as long as the world continues to consume oil, it will not pass.