Here is the second week of the world financial markets reeling. The price of oil, starting with March 9, consistently falls, and at the auction on March 17 at times it fell below the psychologically important mark in 30 dollars for barrel. After oil prices fell and stock markets and the Russian ruble. But if the stock markets suffer the most from the pandemic coronavirus, the Russian currency fell because of the oil, from which substantially depends on the entire economy of the Russian Federation.
The sharp depreciation of energy began immediately after Russia on March 6, refused the offer of Saudi Arabia to further cut oil production because of the pandemic. “The fact that Russia refused to join the deal and OPEC to reduce production – was the main trigger. Global speculators reacted very nervously to this news, and here we see a magical drop in the value of a barrel”, – said Sergei Drozdov, General Ledger analyst at FINAM.
Riyadh has declared Russia the “price war”
Now we are talking about this “price war” that Russia in response to its refusal to reduce the volume of production announced by Saudi Arabia and its OPEC partners. Riyadh vengeance offers buyers of raw materials – including, judging from the media, and Belarus – additional large-scale supplies of oil at reduced prices.
As told DW Mikhail Krutikhin, partner of consulting company RusEnergy, “we already see that in Europe, the Saudis go for the traditional buyers of Russian oil, offer a tremendous discount, prices below $ 25 per barrel and any amount of oil”.
Will Russia be able to win in this confrontation – and how big is the margin of safety of the Russian economy?
“First, we need to consider the state of the national welfare Fund. It has, to put it mildly, “razderbanivayut”, – said the expert. – First took a large amount of the Scam, which was called “the transfer of shares of the savings Bank”. Second, the Fund is shrinking because it needs to compensate for the drop in oil below $ 40… and Then, there is a queue of oil companies who want some benefits. I do not exclude that this Fund can not be enough at 6 years, not 3 years, as promised to us by the Ministers and members of the government, but much less. Well, until April 22, to vote (on amendments to the Constitution of the Russian Federation. – Ed.) will throw dollars into the financial system to support the ruble at a level less than 80 rubles per dollar, but then you can let go”.
The situation in the oil market – extraordinary
The head of analytical Department at Commerzbank commodity markets Eugen Weinberg indicates that the situation on the energy market is currently evolving quite extraordinary.
“To understand the situation, imagine how is trading oil at the moment, and what are the conditions proposed by the Saudis – said the expert of the second largest financial institution in Germany. – They offered to the core group which currently receives oil from Russia to European factories and buyers – the price of Brent crude minus $ 10. This has never happened before: when oil cost $ 50 or $ 80. Such a discount the Saudis did not offer never. This means that if suddenly in the negative case, for example, the price of oil in April will be reduced to $ 25, they will deliver oil for $ 15. Russian oil – for example, the mark Urals is now trading with a discount of $ 3 relative to Brent. That is, it is so good offer that makes sense to buy Russian oil will not actually be”.
That Moscow will emerge victorious from the confrontation with Riyadh, doubts and Mikhail Krutikhin. “There is a calculation of the Ministry of Finance (Russia. – Ed.), – reminds the expert. – If within 5 years the price of Russian oil will be at around 20 dollars per barrel, Russia is in these 5 years, will lose 19% of their GDP. And this economic collapse, a catastrophe.”
Explaining his reluctance to renew a deal with OPEC in Moscow have repeatedly indicated that production cuts were only American producers of shale oil, taking those market segments that have left them with Russia. But, as experts unanimously point, American oil producers has in the past showed the wonders of flexibility, and shale oil production there returned to its original state immediately after the normalization of prices in the market. In any case, as said Mikhail Krutikhin, the United States will find the opportunity to support this sector, representing only 1% of GDP.
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