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The experts evaluated the Novak Russia’s withdrawal from the transaction OPEC+

Эксперты оценили заявление Новака о выходе России из сделки ОПЕК+

About the possible collapse of the oil cartel began in Russia. Our country can withdraw from the deal, OPEC+ in 2020, said Minister of energy Alexander Novak. He believes that the fear of a sharp fall in oil prices is not worth it. But experts do not think so. The statement of the Minister very unexpected and it can lead to a strong drop in prices for “black gold”.

The reduction of oil production in the OPEC part of the transaction+ is not an eternal process, all the same will need to take the decision to withdraw from the transaction. This was stated by Russian energy Minister Alexander Novak, the TV channel “Russia 24” (VGTRK).

He believes that the market situation is currently stable, the price of oil satisfies the consumer and manufacturers.

According to him, Russia can withdraw from the deal in 2020.

“I believe this deal is not eternal, it showed a positive result for the 2017-2019 years. During this period, we not only reduce production, but increased in the period when it was necessary to increase production for a growing consumption, it was in 2018. In General, the proper coordination quite a positive effect on markets”, — said Novak.

In his opinion, in the coming year should not be afraid of falling prices for “black gold” to $30 per barrel.

Oil prices in the winter are kept at the level of $60 per barrel. In the summer, when there will be demand growth, “it will be necessary to ensure that this demand”, — said the Minister.

“I don’t think these figures we expect. Today the market is more or less balanced, and we see that the volatility is quite low. Moreover, external shocks in the last few months not so much as it was in the beginning of the year. We see a more or less stable situation, although, of course, there is the uncertainty of production in Libya, Venezuela and Iran, and any changes to production in these countries or political changes can greatly affect the market,” he said.

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In March, as part of OPEC+ is planned to discuss the market situation and the future of the agreement. It is valid until 1 April. The potential increase in production is one option to meet the growing demand in the market.

On the reduction of production of oil-producing countries thought after the collapse of oil prices in 2014-2015. OPEC and several non-organisation countries (OPEC+) agreed in late 2016 in Vienna on the reduction of oil production to 1.8 million barrels per day from the level of October 2016.

The contract started from the beginning of 2017. Last year, countries agreed to cut oil production by a total of 1.2 million barrels per day in 2019. Innovations were made in December.

At the last meeting, the countries agreed on an additional reduction in the first quarter of 2020. They agreed only in excess of existing quotas to reduce production by 500 thousand barrels. Thus, Russia will have to reduce daily production by 300 thousand barrels.

The Novak is very unexpected, ‘ says the managing partner of the expert group Veta Ilya Zharskiy. He believes that “it’s foreign policy response to any pressure on Russia from the oil-producing countries”. That is to take seriously its not worth it.

Given the fact that the share of the oil and gas industry accounts for 20% of Russia’s GDP, the reduction of oil production is very sensitive to economic growth, said the Deputy head of IAC “Alpari” Natalia Milchakova.

But the deal OPEC+ helping us win from the point of view of filling the “capsule”, that is, the National welfare Fund (NWF), says the expert. The Fund was established from the money generated by the income of the oil industry.

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I wonder whether the support of Russia and other countries-participants of the OPEC cartel+, their statements and responses will be known next week, says zarsky.

Experts generally anticipate the imminent beginning of the collapse of the cartel. From the agreement on production cuts is already out of Ecuador and it could follow the example of other countries for which the question of filling its own budget and ensure their internal policies may be more important than international prestige and arrangements, he says.

But the collapse of the cartel will inevitably lead to a drop in oil prices. It is likely that as a result of the collapse of the price of “black gold” could fall to $30-40 per barrel, and go even lower, says zarsky.

“If you imagine that the quotas are abolished, the market is somewhere in the half a year spill of up to 1.5 million barrels./day. oil. This amount easily covers the projected IEA demand growth to 2020 1.1 million barrels./day not to mention the fact that even more of the total production growth from the U.S., Brazil, Canada, Guyana and Norway (more than 2 million bbl./day). In case of realization of this scenario it can be expected that oil prices will start to decline sharply, down to $ 50./barrels.”, says Catherine Grushovenko, expert energy Centre of Moscow school of management SKOLKOVO.

Senior analyst at BCS Premier Sergei Suverov, meanwhile, does not expect a serious fall in oil prices, as the import of raw materials from China continues to grow, and risks the imminent recession in the U.S. has declined.

The oil market has no answer for Novak. Apparently, does not believe that Russia may withdraw from the deal. Thus, the cost of futures for oil of mark Brent with delivery in February at the time of delivery of the notes amounted to $67,8. It is minus only 0.1%.

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