On the threshold of redistribution

On the threshold of redistribution

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Analyst Alexander Pasechnik — about the likely consequences of decisions on reduction of oil production

Photo: youtube.com/РБК

Beginning of 2017 marked by very positive sentiment on the world oil market — the price of a barrel of Brent confidently entrenched in the borders above $55, and sometimes in the first week of Jan quotes time tested the levels above $57. Now is not far off expected taking by speculators at $60 per barrel.

So confident bullish mood on commodities exchanges due to the beginning of the leading oil producers from January 1 of the global agreement, which prescribes to seriously reduce the production of black gold — collectively, by the end of the first half of 2017 the market will have to do every day to 1.8 million barrels lower, of which 1.2 million will be in the members of the Organization of countries — exporters of oil (OPEC), and about 0.6 million barrels — per pool uncertainy miners, including a significant contribution of Russia to 0.3 million barrels.

Our oil companies already undertook to perform the limiting resolution: during the first week of January, they have cut production of oil and gas condensate to 11.3 million barrels per day. According to estimates, CDU TEK, this is 1.2% lower than at the end of December 2016, when production reached of 11.44 million barrels per day.

In addition, the leader of OPEC — Saudi Arabia from October 2016 to early 2017 reduced production of no less than 486 thousand barrels a day, approximately to the level of 10.06 million barrels. Influence of Riyadh in this context, said on 8 January in its statement, OPEC Secretary General Mohammed Barkindo, calling Saudi Arabia one of the leaders in the decline.

In turn, Iraq, occupying the second place in oil production in the cartel, also began to cut production of black gold, promising to “remove” from the market up to 210 thousand barrels. Thus, according to the oil Ministry of Iraq on 5 January, the country will reduce daily output of the wells to 4.35 million barrels.

Less powerful members of OPEC also have held true to their promises. For example, the Kuwaiti group Kuwait Petroleum intends to reduce production by 131 thousand barrels — up to the turn of 2.75 million barrels per day. According to local media, in the first quarter of 2017, the company intends to reduce and the supply of exports of raw materials.

Significantly distracting from the overall cartel series, perhaps only Iran — the behavior of the country is contrary to the actions of the leaders of the cartel: it makes use of the impact of change. Iran already took advantage of opportunistic price rises on the stock exchanges by selling oil reserves, which is stored in offshore tankers.

But here is fair to say that Iran is legally out of the agreement on the global reduction of oil production, but because the country has no encumbrances no time in building its export and production strategies.

Because of the limited pool of countries involved in a global agreement on capping, comes a certain redivision of the world market. Out of the agreements reached in Vienna on November 30, as is known, was not only Iran but also the United States, which consists of three world leaders of production of black gold. Therefore, changes are inevitable.

The important thing is that now it is not clear — how will be realized the world export strategy. Countries — participants of the “Vienna agreement” to artificially reduce the sentence, but seems to be demand not to “cross out”. After all, there is a corresponding proportional agreements to limit imports from countries dependent on external supplies of hydrocarbons. It turns out that the adherents of limiting the Protocol still rely on low demand or to review the buyers contract portfolios to favor certain countries that are able to add in the production of black gold. But there were many “heroes” and whether they will offset the elimination of at least half a million barrels of daily production of the Saudis — the big question. Even a chance of increased American shale oil producers can hardly make up for the impending world oil shortage. Especially because of the new shale boom in the United States may not be: it is estimated semi-annual horizon for an agreement on the limitation of production — not as motivating factor to return of investment in the sector low-margin shale oil.

But from the point of view of our national interests positive visible support for the quotations of the barrel of an agreement limiting the production of oil, beneficial impact on the Russian budget. Although in connection with the oil production cut may be vulnerable to domestic fuel market. There are prerequisites for unreasonable spikes in fuel prices. For example, in early January the head of the Kemerovo region Aman Tuleyev has addressed to the Chairman of the Russian government Dmitry Medvedev with a request to prevent price increases in the region and make interventions.

Similar challenges await and most other oil exporters participating in the agreement about limits. So most likely as exposure to the problems of contractual deficiency, the probability of limiting the global extension of the moratorium on the second half of the year will steadily decline. Of course, unless China’s economy, which in recent years is considered to be one of the key indicators in terms of the formation of the global demand for hydrocarbons, will enter a stagnation phase. But here the final conclusions in any case, it makes sense to do not earlier than the end of the first quarter, when it will be accumulated and submitted to the official macroeconomic statistics of China.

Author — the head of analytical Department of national energy security Fund

The opinion of the author may not coincide with the position of the editorial Board