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World oil market: who’s the king?

Мировой рынок нефти: кто же на нем «царь»?

The real sensation was the presentation of the head of “Rosneft” Igor Sechin at the XII-th Eurasian forum in Verona (Italy). Naturally, his speech he devoted to the situation on the world market of “black gold”. That is the key phrase which caused a great resonance not only in Verona, but all over the world: “If at the previous forums in Verona we talked about the fact that the world oil market, there are three controller — Russia, Saudi Arabia and USA, today on the market there is only one regulator — the United States. And it must be taken for granted”.

Under “control” of Igor Sechin understands the country that in the global market occupies a strategic position and can effectively control the prices of “black gold”. Indeed, at last year’s forum in Verona, the head of “Rosneft” said that in the oil market over the next 10-15 years there will be a triumvirate of equal regulators, Russia, Saudi Arabia and the United States. And now a year Sechin radically changes their assessment. And not just predicts, and says that in the world market of “black gold” has established a “monarchy”. A “monarch” (“king”) became the United States.

It seems to me that Igor Ivanovich, to put it mildly, somewhat exaggerated. And he did it to draw attention to the threat that America may indeed be the “king” in the world market of “black gold”.

Yes, the US is actively expanding its oil potential. But while the volume of exports of “black gold” America is not in the first place in the world. Here is the ranking of the top ten countries in the greatness of oil exports last year (in parentheses indicate the share of countries in world exports of “black gold” in 2018, %):

Saudi Arabia (16,1)

Russian Federation (11,4)

Iraq (8,7)

Canada (5,9)

United Arab Emirates (5,2)

Kuwait (4,5)

Iran (4,5)

USA (4,3)

Nigeria (3,8)

Kazakhstan (3,3)

As you can see, at the end of last year, the United States was only in eighth place in the top ten leading exporters of oil. To the title “king” America obviously does not hold.

Yes, of course, in this year of the disposition of the countries in the top 10 has changed significantly. Iran, in particular, in General, likely flew out of the top 10. And America is probably further increased its exports. When will be summed up in 2019, then, do not rule it rises from eighth place to sixth or even fifth.

By the way, according to estimates by the International energy Agency (IEA), in 2024 the US will be exporting No. 2 after Saudi Arabia. Where will Russia be in five years? The IEA does not specify, but it is clear that the lower in the rating than the United States.

So, in 2024, the title “king of” Saudi Arabia maintains. But it will be a formal “king”. And will rule America (we understand that in Washington there are effective enough leverage in Riyadh, which will make it to the oil policy, which need to be America).

It is clear that this predictive assessment. And, apparently, Igor Ivanovich really don’t want these predictions have taken place. That’s why he exaggerated in his speech at the forum.

But the dynamics of oil production in America is really amazing. They say that the oil breakthrough of the country occurred with the arrival of the White house of Donald trump. No, it started earlier — following the financial crisis of 2007-2009, when they began to recover the price of hydrocarbons. In America started the so-called “shale revolution” (the extraction of oil from oil shale, whose reserves are huge there).

In 2012, there was a particularly noticeable jump in oil production in the country increased by 15% a year and amounted to 6.5 million barrels/day. Three years later, the United States has increased production by half, bringing it to almost 10 million barrels/day. America is firmly entrenched in the top three in production.

According to “British petroleum” in 2016, the layout in the top three were as follows (share in world oil production, %): Saudi Arabia — 13,4; Russian Federation — 12,6; USA is 12.4. Sechin in his report gave the following figures for the past year, Russia increased production by 3%, Saudi Arabia by 14% and the USA by 26%. Moreover, such breakthrough USA made, added Sechin, thanks to the “ecological nihilism of the US administration”. Keeping in mind the harm which is accompanied by the production of shale oil.

This year the United States has ranked first in three of the main earners. Here is the data for July 2019 (the production volume in million barrels/day): United States — 11,98; Russian Federation — 11,12; Saudi Arabia — of 9.69. Now here is the most recent picture at the beginning of October 2019: US — 11,81; Russian Federation — 10,77; Saudi Arabia — 9,13. July — Oct production of “black gold” in Saudi Arabia decreased by 0.56 million barrels/day, Russia — 0.35 million and in the US — only 0.17 million barrels/day. Obviously, with such trends, the US share of world production will increase.

Dynamically growing export of “black gold” from the USA. Will bring some data from the report Sechin in Verona. Over the past three years, us oil exports have increased six-fold. While formerly the main buyer was Canada, today oil from the US comes in more than 40 countries. In 2018 the volume of supply in the EU grew by 9.2 times, to 22.7 million tons. This year (January — July 2019) more than a quarter of all foreign supplies the United States had on the countries of the European Union, said Sechin.

Here you can still add a curious fact, which was filed by the American media as a sensation: at the end of last year on a weekly basis for the first time in 70 years was recorded the excess of oil exports over its imports. American media trumpeted the news as follows: U.S. may soon become a sustainable net exporter of “black gold”. Until December achievement of the 2018 America failed to repeat that success. But some experts believe that in 2020 or 2021, the U.S. may become a full-fledged a net exporter of oil (the excess of exports over imports on an annual basis).

Sechin before the forum in Verona have repeatedly voiced the idea that the main means of expansion of the United States on the world oil market began economic sanctions against significant producers and exporters of “black gold” (Iran, Venezuela, Russia). Only in 2018 the supply of Iranian oil to the European market dropped from 27.3 million to 18.5 million tons. In 2019 deliveries to Europe, Iranian oil continued to decline, while American exporters to occupy the vacated niche of the market. “Now under us sanctions in Iran, Venezuela and Russia is about a third of the world’s reserves and a fifth of the world’s oil production,” — said Sechin.

But the main damage to the oil industry in Russia and promotion of the “oil” of Washington’s interests in the world gets in Moscow. “Head” of this thesis Igor is not voiced. But this is evidenced by the documents of “Rosneft” has directed to address of the Russian President. As well as public speeches press-Secretary of “Rosneft” Mikhail Leontiev.

The essence of management concerns “Rosneft” is that, prolonging their obligations under OPEC+ on the reduction of oil exports and the maintenance of unnecessarily high prices for “black gold”, we enable America to strengthen its position in the production and export of “black gold”. I already wrote about this. Once again, give a short explanation.

The reduction in our exports means that due to these cuts, America will increase its delivery and “squeeze” us from the world market. The maintenance of high prices allows America to continue to increase production of shale oil. Saudi Arabia States that she needs a price of at least $ 85 per barrel. They say that without that Riyadh will not be able to balance its budget. This is all an act. Riyadh calls the price of “black gold” that is needed in Washington.

Putin (apparently prompted by Sechin) has repeatedly said that Russia is ready to settle for a price of 60 dollars. But Mr. Novak, Minister of energy of Russia, presenting the country as OPEC+, I think, to listen more to Riyadh than to Moscow. From my point of view, the continued Russian participation in OPEC+ is impractical and even dangerous for the interests of the country.

The current agreement with OPEC Russia was signed this summer and will be valid until March 2020. Rosneft and other Russian oil companies, to put it mildly, not happy with this agreement. Apparently, too “alarmist” statement by Sechin in Verona addressed to the Russian authorities. And is a public call for Russia’s withdrawal from OPEC+.

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