Big secret big OPEC


Truth, nothing but truth



Last Wednesday in Vienna, two days before the Friday meeting on a series of OPEC + agreements, the so-called ministerial meeting of the monitoring committee was unusually promptly held. This is a traditional regular meeting according to a long-agreed schedule, but expanded - with the participation of signatories of well-known transactions.

The monitoring committee usually prepares materials and a decision for a large ministerial meeting, which usually only approves the committee’s decisions. But this is not at all why, but due to the fact that the situation in the oil market really depends on it and, as a result, the state of the entire world economy in the context of the growing epidemic of the Covid19 virus, the meeting was in the center of attention of the world media.


The expectations of the writing fraternity from a large interview of oil ministers were justified only partially. Journalists were especially encouraged when it became known that Russia had not yet supported an excessively large decline in production levels, citing technological problems and the inability to immediately comply with new OPEC + standards.

Almost immediately, this was followed by the departure from the meeting of the Russian Minister of Energy, Alexander Novak. Many were ready to report the OPEC’s divorce from Russia, but Novak quickly relieved the tension when he first announced that he would return to the big meeting on March 6th. The Minister explained that his departure from the meeting of the OPEC + Ministerial Monitoring Committee shortly before its completion had been planned in advance and had nothing to do with the negotiations.

Yes, Russia did not support the proposal of most OPEC + partners to increase production cuts due to the impact of the coronavirus epidemic on the oil market. But this, we repeat, only so far, because in Moscow they well understand that they will have to do something in any case. To date, the total volume of reduction in oil production by the OPEC + Pact participants, recall, is 1,7 million barrels per day. But this is not enough to maintain oil quotes at an acceptable level.

The main share of the decline, almost 500 thousand barrels per day, as you know, took over Saudi Arabia, the traditional long-term leader of OPEC. Russia, which basically does not join the organization, but has established good interaction with it in the form of a series of OPEC + deals, is on the second with a quota of 300 thousand barrels.

Currently, the prospect of reducing the total quotas by another 500 thousand barrels is being discussed, of which Russia, according to experts, may get 100 thousand or even more. Meanwhile, our oil industry is already experiencing serious problems associated with the need to comply with OPEC + standards.

Demand in the domestic market, which is already extremely low due to an abnormally warm winter, does not compensate for significant losses in exports. At present, the prospect of closing several dozen low-profit wells is becoming a brutal reality, since reducing production at large fields is almost impossible due to technological reasons.


In fact, on Wednesday there has not yet been a disagreement or disruption of the next pluses to OPEC transactions. But for some reason, the members of the monitoring committee decided for some time, maybe only until March 6, not to spread about the decisions taken. There are no doubts that some decisions, which obviously suit all the participants in the meeting, were made.

Who is not the first, that is not the second


In fact, the first to be stunned by the growth of the Chinese coronavirus beyond the Middle Kingdom, were, as you would expect, stock brokers. They brought down quotes and indices, which leads to suspicions of an outright thirst to finally play for a fall. The drop in oil prices, which was also expected, exceeded all the most pessimistic forecasts by inertia.

Oil traders, who are well aware that the real drop in demand for black gold is not so great that prices have fallen by almost half, simply ended up at the tail end of stockbrokers. Pressure on the market, which was exerted and still exerted by speculators, literally required an answer. The answer from decision makers.

However, the answer, which is hardly worth considering adequate, was clearly delayed. Hopes that the situation would resolve at least a little did not materialize, and oil producers had to take drastic measures. And we are talking, it seems, not only about a sharp decrease in production quotas, but also about urgently building and filling up the colossal volumes of backup storage.

Under such storages, where it will be possible to drain excess oil, existing reservoirs in China, in rogue countries under sanctions such as Iran and Russia, are quite suitable, but much remains to be built. Build quickly and in colossal volumes in order to reserve the ability to manipulate the volumes of supplies to the markets much more freely.

Big secret big OPEC

Returning to the scale of a possible decline, we note that the situation cleared up a bit when some of the other members of the monitoring committee and some of the ministers got into the public. And then a simply frightening figure sounded of the necessary reduction of quotas of 1,5 million barrels.

Despite the fact that the ministerial meeting will continue on Friday, when everything should be decided, oil quotes are already creeping down. The prospect of the return of the Russian minister and the upcoming voice of the official Russian position did not really inspire traders to buy. Sales offers, although rather sluggish, continue to prevail.

According to reports from Vienna, Mohammed Arkab, Minister of Energy of Algeria, President of the OPEC Conference, became one of those who did not hide information about one and a half million barrels. He backed up the dangerous figure with a rather lengthy statement, having only an indirect relation to the case: “... the price (for oil. - Aut.) Fell to $ 50 per barrel, while at the beginning of the year a barrel was worth more than $ 65. "Many factories, especially in the automotive sector, were forced to cease production, which had implications for the entire production chain in China."

Following him, the UAE Oil Minister Suheil al-Mazrui managed to bring in at least a little positive, who said that OPEC “does not plan to do anything unilaterally.” Cartel members, he said, "agreed that they would do everything together as a group." Journalists immediately concluded that the group refers to OPEC +.

But even the OPEC Secretary General, Mohammed Barkindo, did not say specifically what the Russian quota will be or should be in those same one and a half million. Experts believe that in this colossal volume, Russia may request cuts even by more than 300 thousand barrels. In any case, by Thursday evening it was certain that countries that were not members of OPEC (besides Russia, it was Kazakhstan, Indonesia, and it was possible that even the United States) would be offered a total quota of 500 thousand barrels.

Our oil industry can cut another 300 thousand barrels just can not pull. The situation is such that we have to choose from two evils - either reconcile ourselves to extremely low oil prices for a long time, or, again, squeeze ourselves to our detriment. In both cases, the blow to Russian oil production will be very strong, and which of the two evils will turn out to be bigger and worse, no one can predict at the moment.

It is well known that Russian business, sending Minister Novak to Vienna, agreed only to extend the existing quotas, but not to expand them. The expansion, as it turns out, is so massive that the possible benefit from it in the form of newly rising prices for hydrocarbons can be completely useless.
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  1. ximkim 6 March 2020 16: 10 New
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    [/ quote] Our oil industry cutting another 300 thousand barrels may simply not pull. The situation is such that we have to choose from two evils - either reconcile ourselves to extremely low oil prices for a long time, or, again, squeeze ourselves to our detriment. In both cases, the blow to Russian oil production will be very strong, and which of the two evils will turn out to be bigger and worse than that, no one can predict at the moment. [quote]

    In Russia, there is only one evil - oil product prices will always reach the moon.
    1. podymych 6 March 2020 18: 54 New
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      I can’t disagree with you, since gasoline in our country certainly rises in price with growth, and even more so, with falling oil prices
      1. Malyuta 7 March 2020 08: 57 New
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        Quote: podymych
        as gasoline in our country certainly rises in price with growth, and even more so, with falling oil prices

        Our (in declarations) companies will need to compensate for their losses due to the domestic market, namely, at the expense of us citizens!
        If the downward trend in hydrocarbon prices continues, then we will have difficult times, and this is the result of the "greatest" foreign policy, it is better to keep silent about the domestic one.
  2. Scharnhorst 6 March 2020 16: 13 New
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    I would venture to suggest that Russia is still more profitable to further reduce oil prices, without a new reduction in production. This decision will hit American oil and gas production in the shale industry harder and put many existing wells on the brink of profitability. And since the business of the USA and Great Britain has not been very “picky” in recent years, they will continue to purchase Russian energy resources. We’ll lose a bit on oil prices and sell more LNG to Anglo-Saxons.
    1. ximkim 6 March 2020 16: 19 New
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      It will not work, since the oil business is built on greed ..
    2. bar
      bar 6 March 2020 18: 19 New
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      The problem is that gas prices are also calculated from oil prices.
    3. Odysseus 6 March 2020 20: 43 New
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      Quote: Scharnhorst
      I would venture to suggest that Russia is still more profitable to further reduce oil prices, without a new reduction in production.

      This is the same as saying that for your health it is most beneficial for you to put a bullet in your head.
      1. Mikhail3 10 March 2020 15: 55 New
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        Invested in expensive oil? Sorry))
    4. Mountain shooter 7 March 2020 08: 42 New
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      Quote: Scharnhorst
      I would venture to suggest that Russia is still more profitable to further reduce oil prices, without a new reduction in production. This decision will hit American oil and gas production harder

      Very similar to that. A blow to shale oil could shock the United States. And Russia's refusal to continue to reduce quotas has already taken place. And the speculators have already worked out. Panic, hysteria, oil at 45, a dollar at 68 ... Is it all gone? I don’t think so ...
      1. Malyuta 7 March 2020 08: 59 New
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        Quote: Mountain Shooter
        And Russia's refusal to continue to reduce quotas has already taken place. And the speculators have already worked out. Panic, hysteria, oil at 45, a dollar at 68 ... Is it all gone? I don’t think so ...

        And here, think, don’t think, but “Russia will lose from $ 100 million to $ 150 million a day due to the collapse of the OPEC + deal,” LUKOIL co-owner Leonid Fedun told The Bell.

        According to Fedun, such losses add up to the expected fall in oil prices from $ 60 to $ 40 per barrel, with Russian exports of 5 million barrels per day. LUKOIL co-owner noted that Russian companies declared their desire to increase production. At the same time, according to him, an increase of 2-3% will not be able to compensate for future losses.

        “This is a very unexpected, irrational, to put it mildly, decision,” Fedun commented on the breakup of the deal. "

        Read more at RBC:
        https://www.rbc.ru/rbcfreenews/5e62f5469a79478ef6fd9041?utm_source=yxnews&utm_medium=desktop&utm_referrer=https%3A%2F%2Fyandex.ru%2Fnews
        1. Salty 7 March 2020 09: 23 New
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          Quote: Malyuta
          "Russia will lose from $ 100 million to $ 150 million per day due to the collapse of the OPEC + deal," LUKOIL co-owner Leonid Fedun told The Bell

          This Fedun lied twice: 1) 5 barrels * (000 - 000 = 60) dollars = $ 40 million. Where he got 20 is not clear, and 100) This amount will be lost not by Russia, but by oil companies. Russia, perhaps, will not lose anything at all, no matter what the different Fedunas think about it.

          By the way, for the United States this creates much more serious problems: the lower price limit, when shale oil production is still profitable, is $ 45 per barrel. Maybe your Fedun is just a foreign agent?
          1. Eug
            Eug 13 March 2020 15: 52 New
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            As for me, Fedun is calculating from PROBABLE profit, it is clear that with a decrease in prices, the resulting value is negative. And you can calculate "low price minus cost" (which includes salaries, taxes, profitability,% for development, etc.). And this value, even at $ 25 / barrel, is likely to be positive. But the budget fullness from the "low" oil will suffer, but this can be compensated within certain limits by an increase in sales and an increase in the exchange rate. So, as for me, it’s worth considering the amount “from financial funds to the state budget”.
        2. Mountain shooter 7 March 2020 09: 32 New
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          Quote: Malyuta

          “This is a very unexpected, irrational, to put it mildly, decision,” Fedun commented on the breakup of the deal.

          Maybe Fedun doesn't know everything? Or is it a stuffing for ... someone? So far, Russia's balance is positive by 10 lard per week approximately ... Even when it changes by the same amount to negative, there will be enough reserves for several years. But it will not change so much.
          In general, it seemed to me that as soon as a threat to Russian OFZs arises (speculators try to sell them - they immediately raise the dollar exchange rate, under any pretext ... And so LEVEL the possible losses from a possible reduction in their price on the exchange) ...
          1. Malyuta 7 March 2020 10: 09 New
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            Quote: Mountain Shooter
            This Fedun lied twice: 1) 5 barrels * (000 - 000 = 60) dollars = $ 40 million. Where he got 20 is not clear, and 100) This amount will be lost not by Russia, but by oil companies. Russia, perhaps, will not lose anything at all, no matter what the different Fedunas think about it.

            Firstly, Fedun outlined the scope of losses and in the interval from 100 to 150 million per day. Do not distort.
            And the second is your strange position, when Lukashenko demands a reduction in prices, so Russia immediately loses, the Bulgarians got a 40% discount and nothing, but when it comes to lowering global prices, then right away, it seems not Russia, but which there’s Fedun. It’s strange.
            Quote: Mountain Shooter
            It seemed to me that as soon as a threat to Russian OFZs arises (speculators try to sell them - they immediately raise the dollar, under any pretext ... And so LEVEL the possible losses from a possible reduction in their price on the exchange) ...

            The question is that our monopolists once again threw OPEC and, instead of reducing production, are building up so that their pockets are not empty.
            As for speculators, it was with the hands of our speculators, who were accountable and related to the Central Bank of insider information, raised the dollar twice from 30 to 60. Now they will again be speculative in pluses, and we citizens around in the minuses, such as raising prices for imported goods of the whole nomenclature, and accordingly of ours and pseudo-ours, from here a further fall in the purchasing power of the population, respectively a fall in the standard of living, and so on ..
            1. Salty 7 March 2020 10: 41 New
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              Quote: Malyuta
              First, Fedun outlined the scope of losses and in the interval from 100 to 150 million per day.

              It doesn’t work out "150 a day", purely mathematically. Do not distort.

              Quote: Malyuta
              you have a strange position when Lukashenko demands a reduction in prices, so Russia immediately loses

              You confuse me with someone, this is not my position. In addition, you confuse gas with oil:

              Quote: Malyuta
              Bulgarians got a 40% discount and nothing

              Bulgarians are about gas. I tell you, you still forgot to write about palm oil. laughing

              Quote: Malyuta
              but when it comes to lowering global prices, then right away, it’s not Russia, but some kind of Fedun. Weird

              Nothing strange. It is precisely the collective Fedun that loses the sums voiced by Fedun. The state of Soi will receive 16.5% of the cost of the extracted raw materials (and other taxes), and so, yes, it will receive less than it was, but not at all 150 (or even 100) lyam green per day. It's simple, learn the materiel.
              1. Malyuta 7 March 2020 16: 13 New
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                Quote: SaltY
                Bulgarians are about gas. I suggest

                The price of gas in Russian supplies is tightly tied to the price of oil.
                Quote: SaltY
                you forgot about palm oil.

                Palm oil, we recall when there will be an article "palm oil from Indonesia in exchange for airplanes from Russia."
                1. Salty 7 March 2020 16: 16 New
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                  Quote: Malyuta
                  The price of gas in Russian supplies is tightly tied to the price of oil

                  So what? The fact that you confuse oil with gas does not cancel laughing

                  Quote: Malyuta
                  Palm oil we will remember when there will be an article

                  You remember him much earlier. I will remind you of your promise, on occasion.
    5. ddd1975 11 March 2020 02: 57 New
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      one could agree, but on condition that fuel prices in the country fall, but this is from the realm of fantasy ... The budget is nothing to "patch" !!! They squeezed out everything that they could and even more from the people, and any increase in prices will simply kill the domestic market - reductions will begin at enterprises as in the "90s". Already now the lines are stopping, such leaps are forcing production to keep a “big corridor” of the dollar’s ​​value and raise prices - rising prices for goods in relation to rising wages are already very frightening ... Now we are talking about accelerating inflation to 12% at the beginning of the year - but in reality it is much more ... So, we are waiting for new upheavals and possibly even tough unrest among the people.
  3. Odysseus 6 March 2020 20: 42 New
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    Meanwhile, against the background of a clear drop in demand in China and the increase in panic due to coronavirus, the price of oil today fell by 8% to 45 per barrel.
    Against the background of the current fall of Mosbirzhi by 4,5%, we expect a black Tuesday on March 10.
  4. 123456789 6 March 2020 23: 25 New
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    How much OPEC + reduces oil production, by how much the US increases it. And so it will be until the oil price falls below the profitability of shale oil production
  5. honest people 7 March 2020 06: 27 New
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    Quote: 123456789
    How much OPEC + reduces oil production, by how much the US increases it. And so it will be until the oil price falls below the profitability of shale oil production

    It will be so until the one that cuts production loses its last markets!
    1. Mountain shooter 7 March 2020 10: 20 New
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      Quote: honest people

      So it will be until the one that cuts production loses its last markets

      Yes, only oil is not an abstraction, but a very specific substance, and it is not very much interchangeable at oil refineries. Belarus is already convinced of that. Shale oil is rather a form of gas condensate. There are no heavy fractions in it. So there are plenty of conditional oil (in the form of futures) on the market, 10 times more than real, contracted on a long-term basis, for specific refineries, for long deliveries ... We only see the tip of the iceberg. A little one.
  6. The comment was deleted.
  7. honest people 7 March 2020 10: 41 New
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    Quote: 123456789
    How much OPEC + reduces oil production, by how much the US increases it. And so it will be until the oil price falls below the profitability of shale oil production

    Cost of a barrel

    Aged people must understand the deposits in Siberia with the cheapest oil being depleted. The oil age is running out and you need to have time to sell as much as possible while there is still demand, and Novak, unlike the idled ones, understands this very well and therefore refuses to deal with OPEC
  8. Bagatur 9 March 2020 21: 07 New
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    And when Russia will not become decrepit from the decline in the price of oil? Is it normal to live like this for a long time?
  9. Mikhail3 10 March 2020 15: 50 New
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    Not so long ago, Obama hit the “gas station country,” expecting her economy to be “torn to shreds.” After that, the country of which he was president continued to inflict economic damage on us through sanctions, pressure on bankers, etc. etc. Well, now there was a retaliatory strike.
    How much investment is there in shale oil? A couple of trillions? Here is a pair of someone along the ridge, along the ridge! And let the Fed only try to print this couple of trillions in a new way, the whole system will fail by grandma. No need to spit in the well guys, no ...