What Moscow has taught OPEC: the lesson of the Russian

The oil market closely monitors the actions of oil-producing countries. Response, including pricing, find information Riyadh that all parties to the agreement OPEC+ share the idea of extending austerity agreement. Or that Brazil rejected the “informal offer” of Saudi Arabia to join the agreement.


Photo: gazprom-neft.ru

I do not mention the story about the problems arising from a whole bunch of the Arabian princes in anti-corruption purges, including in the ranks of the excessively overgrown the Royal family. The market, of course, raised the prices, but most importantly these stories with bored purified from the economic point of view, not oil prices (here the influence of the short-term) and the completion of the budget deficit of the Saudi Kingdom due to the property at fault.

If we go back to the actions of OPEC, in control there is a certain gap. And not because many experts, especially at the beginning of the agreement, with undisguised surprise, was met by the information that the agreement as a whole performed because the history of OPEC is replete with examples of quota manipulation on the verge of fraud. I was always surprised by the fact that the cartel and in the narrow part, and joined by parties to the agreement shared and limited quotas on oil production, not export. Meanwhile, the question of control, not only for oil production, but exports from the OPEC members+ was officially delivered to the monitoring Committee in September 2017. Why?

The obvious hole in the agreement indicated action primarily Russia. Here are the statistics. Under the agreement with OPEC in December last year, Russia promised to cut oil production by 300,000 barrels per day compared to October 2016. In September 2017 for the first time in more than three years, oil production in our country, including condensate, fell below levels of a year ago, as noted by the International energy Agency. However, the icing on the cake is that the oil exports from Russia from January to September 2017 increased, according to national energy, about 2%.

Understand that a parallel is debatable, but I can’t resist: it’s like doping to win may not be the one who does not drink, and the one who uses something else, unbarred officially and doping are not.

We can understand those who expressed dissatisfaction with the actions of Russia. “Russia supplies the world market with more oil and gets revenue from exports, its actions reduce the effectiveness of the OPEC deal at the moment”, — says Georgi Slavov from the London brokerage Marex Spectron. “If exports are not reduced in parallel with reduction in oil production, the country obviously hinders the process of rebalancing the market,” said Harry Chilingirian of Bank BNP Paribas. But Russia is not violating anything — “under the terms of the agreements based on production, not exports,” admits Chilingirian.

Russia thus found the opportunity and the OPEC agreement not to disturb, and your interest not to forget, taking advantage of the increased oil prices and expanding their exports. As it is technically possible and why it was different in the first place is Russia? Amrita sen, chief oil analyst at Energy Aspects, a research and consulting company specializing in energy markets, explains, Russia has a much larger refining compared to Saudi Arabia and other OPEC countries, which leads to the seasonal formation of excess oil and “large swings exports.” Sen also noted that Russian exports of products such as gasoline, in the third quarter of 2017 fell by 1 million barrels per day compared to levels a year ago. Analysts recall the recent Russian recession, which reduced domestic demand for oil.

Now, as you might expect, the hole are going to mend. When the monitoring Committee of the OPEC+ that monitors the implementation of the agreement, offered to track data on exports, Russia did not mind, although the Minister of energy Alexander Novak noted that the control of oil exports “will pose some difficulties in terms of accuracy.” However, in early October, Novak predicted that the volume of oil exports from Russia to 2017 “may” be “slightly below the level of 2016.”

Russia, if she is going to develop cooperation with Saudi Arabia, will have a restriction on the export of oil to comply. A colleague of Novak Minister of energy of Saudi Arabia Khalid al-falih back in the summer of 2017 urged countries participating in the agreement, to solve the problem associated with the discrepancy between lower production and higher exports. But how long the agreement is unclear, and its own interest, Russia has managed to implement.

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