Military Review

Nobody needs free oil: the reverse effect of a pandemic


Thank you Mr. President

The direct intervention of Donald Trump in the preparation and signing of the OPEC + agreement has dramatically reduced the pressure on the oil market. However, a long-term decline in hydrocarbon production levels, contrary to expectations of future fuel abundance, may have the opposite effect. Such a paradoxical forecast was made on the pages of the authoritative publication Guardian by the specialists of the French analytical center Shift Project.

The relative stabilization of demand for almost all types of raw materials associated with the beginning of the exit from the COVID-19 pandemic can hardly be encouraging. The increase in oil prices, which can only follow with the resumption of global economic growth, according to French analysts, can be expected no earlier than in a year and a half or two years. And with the current oil market, mining companies are forced to significantly reduce primarily their investment activity.

Nobody needs free oil: the reverse effect of a pandemic

The consequence of this has already been the closure of most low-profit wells, concentrated mainly outside the zones of comfortable oil production. As you know, only the territories of the Middle East zone and a number of offshore projects remain, although not all. Almost all northern, as well as African and notorious shale deposits are now balancing on the brink when they can greatly lose in capacity.

First of all, we are talking about the real prospect of closing for many years such wells that require constant financial support due to the need to use high-tech equipment, as well as solve environmental problems associated with production in natural areas that are extremely risky in this regard.

In recent years, European politicians have been very active in campaigning, although mainly by themselves, for lowering the levels of hydrocarbon consumption. But it is clearly lagging in comparison with the emerging trend of falling world oil production. In this regard, the drop in oil demand and the subsequent decrease in investment in production is already becoming an additional negative factor.

From expensive oil is bad for many, from too cheap - to almost everyone. Most often, the reason for the large-scale deficit is just underestimated prices. From the data of the new Shift Project report, it follows that Europe over the next decade will almost inevitably face the problem of acute oil shortages. And this makes all measures to increase the use of low-carbon energy much more relevant. But not only.

And you, gas!

The report, which the Guardian did not publish, but analyzed in great detail, says about the high risks of achieving a "peak oil supply" before the transition of large economies to cleaner energy sources. The analysis is based on data from the Norwegian consulting company Rystad Energy, which has already managed to frighten many with a very negative gas outlook.

Norwegian experts, in fact, not inclined to deliberate negativity, recently sharply changed their forecasts for world natural gas production. The company Rystad Energy believes that in 2020 it will decrease by 2,6%. Prior to this, the Norwegians confidently predicted an increase in global blue fuel production from 4069 billion cubic meters in 2019 to 4233 billion cubic meters in 2020.

The reason for revising the forecast was, of course, the COVID-19 pandemic, and now Rystad Energy experts are already talking about reducing gas production to 3 billion cubic meters in 962. However, unlike oil estimates, everything will become normal with gas very soon. So, already in 2020, production will increase to 2021 billion cubic meters, and in 4015 to 2022.

The review notes that associated gas production at oil fields will fall more than gas production. However, a decrease in associated gas production in 2020 to 517 billion cubic meters from 547 billion cubic meters recorded in 2019 will not be as critical as a drop in oil production. Moreover, in 2021 it will recover up to 530 billion cubic meters.

Experts predict that production in natural gas fields in 2020, instead of rising to 3687 billion cubic meters, as expected before the pandemic, will decrease. Production will fall from 3521 billion cubic meters in 2019 to 3445 billion cubic meters in 2020.

But it was the Norwegian experts who identified the most alarming trend related precisely to the oil market. After a thorough analysis, they found out that there is now a “systematic decline” in oil production and export from Russia and the former USSR. The rate of this decline, not the most significant, is already exceeding the rate of decline in oil demand by consumers in the European Union.

It is this trend that can have a decisive influence on the situation in the oil market, which can collapse at the most unpredictable moment. It will collapse precisely due to the fact that at some point a peculiar effect of superimposing a local jump in demand on the same local drop in supply will occur. A peculiar price resonance may be just an excuse for a market collapse, more serious reasons for which are literally forming before our eyes.

Rystad Energy experts, followed by analysts from the Shift Project, believe that we should not forget that supplies from Russia provide more than 40% of oil supplies to the EU. And the ability to maintain supplies at a stable high level is becoming increasingly limited for Russia due to purely technological and climatic problems.

Per Magnus Niswin, Rystad Energy’s head of analytics, says it’s “unthinkable” for a situation where the world can still face an impending drop in oil supplies and sharp jumps in market prices, even when global oil demand begins to fall.

“Oil prices are determined by balances, not levels (production and export. - Auth.), We clearly see this now when oil prices are at a fairly healthy level for the dormant oil industry - despite the fact that oil demand is at levels that have not been since 2009, ”said Mr. Nisvin.

Time bomb

One cannot but recall that just recently, in about the same intonation of “horror stories”, writing and filming colleagues spoke about nuclear energy. However, after Germany abandoned its nuclear power plants, a kind of incident happened. American experts, who are clearly clearly being pushed into the back by politicians from Washington who have got involved in energy disputes with Berlin, have proposed building a nuclear power plant in Poland. Could there be at least some doubt that such a project was born in spite of both Russia and Germany.

A serious risk of a crisis with oil supplies to the Old Continent towards the end of the 2020s can cause even a leading oil crisis, when hydrocarbon prices rise to levels that were not at all in stories. Indeed, in addition to the problems of Russia, it is expected that over the next decade, oil production will sharply decline in Africa. And from there, more than 10% of “black gold” comes to the EU.

Large oil companies are already gradually starting to reduce their investment plans for 2020 and 2021. The reduction may reach up to 25 percent or more. The forecasts feature amounts of $ 40 billion, which have to be saved due to the negative consequences of the pandemic and the tendency for oil demand to drop to 25-year lows.

In almost all forecasts, oil prices will remain low for at least another two years. However, after global economies recover from the economic shock of a pandemic, they could rise sharply by the mid-2020s. At about the same time, however, one can predict oil problems in Russia and difficulties in Africa.

In aggregate, this is actually a time bomb, the prevention of an explosion of which is necessary today if the demand for oil exceeds the world level of production. Moreover, it doesn’t matter how: due to the accelerated development of alternative energy, due to the return to the atom, or at the stake on a larger-scale replacement of oil by gas.

It was about this that Magnus Nisvin just expressed somewhat floridly:

“The impact on the undersupplied oil market is largely underestimated. Therefore, a quick transition to other energy sources is crucial not only for the climate, but also in order to avoid long-term recessions in emerging markets caused by insufficient supply of oil and energy. ”
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  1. Ross xnumx
    Ross xnumx 27 June 2020 04: 48
    “Free oil”, “cheap gold”, “reverse gas” ... Something from these formulations carries exchange speculation.
  2. Sergey39
    Sergey39 27 June 2020 05: 30
    Alternative energy in the next decade will not be able to meet the needs. And hydrocarbon energy will save government regulation. The market will not help.
    1. Boris55
      Boris55 27 June 2020 08: 15
      Quote: Sergey39
      ... hydrocarbon energy will save government regulation. The market will not help.

      Everywhere and always all states are engaged in economic regulation (planning).
      The state (any), approving the budget, allocates money for certain purposes (agricultural) or reduces taxes (IT-technologies) i.e. engaged in regulation (planning) - what to develop, and what will wait or disappear altogether. The market is a way to achieve the goals of the plan. There is no equal sign between the plan and the market.

      1. Sergey39
        Sergey39 27 June 2020 13: 58
        Quote: Boris55
        Everywhere and always all states are engaged in economic regulation

        That's right. But there is a big difference when the state works for the state or for the purpose of a certain group of persons (oligarchs).
        1. Boris55
          Boris55 28 June 2020 08: 40
          Quote: Sergey39
          But there is a big difference when the state works for the state or for the purpose of a certain group of persons (oligarchs).

          "State policy and management in a crowd-" elite "society is an agreement reached on the capabilities of various clan-corporate groupings in using the state structure and system to achieve their narrowly corporate goals."

          The only question is how much the clan-corporate group that came to power is dependent on others like her, how much she is patriotic to the country, how much she is susceptible to the aspirations of the people.
    2. Grading
      Grading 27 June 2020 09: 44

      The fall in oil prices was caused by the publication of statistics from the Energy Information Administration of the US Department of Energy (EIA) on the dynamics of oil production in the country.
      For the week ended June 19, 2020, US oil production increased by 500 thousand barrels per day, up to 11 million barrels per day.
      Prior to this, within 10 weeks from the beginning of April 2020, US oil production has been consistently declining.
      Nevertheless, investors are concerned about the possibility of increasing oil production in the United States amid improving market conditions.
      D. Trump made great efforts to conclude a new OPEC + agreement, but the United States itself did not take any obligations to reduce oil production, appealing to market freedom.
      However, when the situation began to improve due to the efforts of OPEC +, shale companies may well take advantage of positive price dynamics and increase production, while OPEC + countries are bound by external obligations.
      Currently, about 90% of production reduction commitments will fall on Russia and key producing countries in the Middle East and Africa.
      Although operators must adhere to agreed production constraints, this does not necessarily correspond to their initial development plans and budget allocation strategies.
      1. Sergey39
        Sergey39 27 June 2020 14: 13
        The price of oil has not fallen, but is kept in the range necessary for the Russian Federation (not oil companies) and will be held for a long time until the oil market is balanced. In the West, investments in the development of oil fields have already sharply decreased. We are supported by the state in order to capture a larger market share in the future. And shale companies can seize the moment and go bankrupt in order to minimize losses. Which they do.
        1. Grading
          Grading 27 June 2020 15: 02
          Your training manual is no longer working; contact the curator from Lakhta for a new one.
          1. The price is not withheld by the Russian Federation and is not comfortable for us.
          2. Investments have decreased for all oil workers and not only for the "Western"
          3.The state we have is a feeder for our own people, including thanks to you kremlebots who sold their homeland for 30 silver coins and it only supports close friends of Sechin Kovalchuk, Rotenberg and the rest, as they say, "Law"
          4. Shale production is quickly recovering at prices above $ 37
          5. Bankrostvo does not affect the debit of the well.
    3. Grading
      Grading 27 June 2020 10: 29

      It is absolutely right to support the "poor oilmen". The following options are proposed for the purchase by each resident on a mandatory quarterly basis, barrels of oil. It is worth considering oil sales in the "load" to other consumer goods. The introduction of innovative technologies for use in medicine, such as oil wrapping, taking baths with oil, rubbing into the scalp, the scale and volume still need to be determined, calculate the estimate, allocate money from the budget. Well what can you say, comrades are going the right way! good
  3. bald
    bald 27 June 2020 06: 17
    Whatever troubles are, there is goods, but there is a merchant. That's just the compassion must be discarded and flirting with large suppliers of hydrocarbons.
    1. Ross xnumx
      Ross xnumx 27 June 2020 12: 44
      Quote: bald
      That's just the compassion must be discarded and flirting with large suppliers of hydrocarbons.

      How the fuck am I supposed to understand that?
      This is how, your mother, I'm sorry to understand?

      That's just compassion must be discarded - understandably...
      and flirt with major suppliers of hydrocarbons. - it is necessary, it is not necessary, to wait or go all the way?
      Russia is a storehouse of hydrocarbons of various consistencies and fractions. The state apparatus of the country organized the extraction of this raw material in such a way that it is sold on the domestic market at the prices of world exchanges (a bunch of speculators). We have all this good for domestic consumption and needs should cost a penny. There are dozens of ways to prevent speculation by various sales intermediaries.
      What could be flirting? Show them the games "Russian Roulette", "Who hid for 10 years with complete confiscation - it's not my fault", "Hide and Seek: how to hide a tricky little head in a tricky ass"?
      We must not play into economic legality, but introduce responsibility (criminal, legal and tax) for speculation on an especially large scale.
      Perhaps then, when world oil prices fall to zero, they will pour gas at gas stations for free: 10 liters per hand ... laughing
      1. bald
        bald 27 June 2020 19: 16
        DO NOT flirt !!! Read the whole sentence, but it is a denial.
  4. aybolyt678
    aybolyt678 27 June 2020 06: 29
    From the article, I realized that there should be a resonant surge in oil price growth due to a decrease in production and the cost of maintaining the industry, but only references to experts are irrelevant. For Russia, with its expensive oil production, the loss of part of the market or wells is inevitable, there will finally be a reason to think about real production
    1. Ross xnumx
      Ross xnumx 27 June 2020 12: 50
      Quote: aybolyt678
      For Russia, with its expensive oil production, the loss of part of the market or wells is inevitable, there will finally be a reason to think about real production

      Not so expensive. In the country with the highest production level, hydrocarbon processing is in its infancy. This is not necessary for those who have appropriated deposits and mineral resources in a single RF, where, according to the constitution, all this should work for the whole people ... For sick children too, so that unhappy parents do not fight in prayers in front of screens for help in the millions of rubles in the same disenfranchised. yes
      1. Serg4545
        Serg4545 28 June 2020 03: 57
        Quote: ROSS 42
        where according to the constitution all this should work for the whole nation

        You are lying, this is not in the Constitution.
      2. Serg4545
        Serg4545 28 June 2020 04: 05
        Quote: ROSS 42
        On sick children, too, so that unhappy parents do not fight in prayers in front of screens for help

        In ABSOLUTELY ANY country in the world there are sick children whose parents cannot pay for their treatment. And so they are forced to ask for funds from acquaintances, through telematophones and so on.
        If you think that in the Russian Federation this is worse than in other countries, provide statistics that would confirm this.
  5. Doccor18
    Doccor18 27 June 2020 06: 31
    The impact on the undersupplied oil market is largely underestimated. 

    A scientific approach to any issue is of interest as a result, however, it is impossible to take into account human, or rather political and man-made, or rather, speculative factors.
    And the fact that oil will be produced less is logical. Now she has climbed to the far north and the deep shelf. Every year, production costs are rising, and oil prices play according to their own rules.
    1. depressant
      depressant 27 June 2020 08: 19
      The oil summaries look like battle. Today is one thing, tomorrow is another. Multivariate analysis does not allow making a correct long-term forecast. Meanwhile, the study of fluctuations in oil prices is an end in itself only for stock speculators. Brent technical support level 37,24 - 36,5 $ per barrel. That is, you can still download, but it's not worth it, but you have to run to the stock exchange and quickly sell "long" shares. This is the case with speculators. But the consequences are simply important for citizens - we have no time for fat, I would live.
      Given the epidemic, growing oil reserves (the US is 1,4 million barrels, China has a lot), the future U.S. duties on European exports, and much more, the IMF sentenced the world economy to a 2020% drop in 4,9 this week. Our experts, having taken an important form, thought and decided to show humanism, sentenced us to a fall of 2%.
      This is a summary of the past week. What analysts decide for themselves on the next one, no one knows. My level of economic evaluation - fluctuations in retail food prices - this is my exchange.
  6. don-1500
    don-1500 27 June 2020 06: 36
    Predict the next 2-3 years, an increase in oil demand, amid a general crisis and stagnation, what is it? Are capitalists getting ready for a big war?
  7. Pavel57
    Pavel57 27 June 2020 07: 22
    The budget hit will be very strong due to lower hydrocarbon supplies.
    1. alone
      alone 27 June 2020 10: 56
      Quote: Pavel57
      The budget hit will be very strong due to lower hydrocarbon supplies.

      It’s already felt ... In April, Russia's GDP fell by 12% .. A considerable share of these 12% is just the same as a decrease in oil and gas supplies.
    2. Ross xnumx
      Ross xnumx 27 June 2020 12: 53
      Quote: Pavel57
      The budget hit will be very strong due to lower hydrocarbon supplies.

      Now it remains to ask interested parties how, from year to year, they were engaged in typesetting and approving just such a budget, which is highly dependent on the supply of hydrocarbons to the foreign market? belay
      1. Pavel57
        Pavel57 27 June 2020 13: 29
        Those who made up the budget believed in the eternity of the dollar and a crisis-free world.
        1. Ross xnumx
          Ross xnumx 27 June 2020 13: 42
          Quote: Pavel57
          Those who made up the budget believed in the eternity of the dollar and a crisis-free world.

          Hardly ... Incompetence and a sharp “chuyka” are not the most vivid manifestations of people of this rank. Milestones they thought least of all in the eternity of the dollar or in a crisis-free capitalist society. Tickets for members of the CPSU and assessments of the courses of the Tax Code and the MLF were present in the biography of each.
          The secret and hidden desire of such people is perpetual rent and parasitism, even in the form of a budget cut ... You remember how the notorious Kudrin reported GDP on a trillion budget rubles that were not used at all:

          The bureaucracy in its pure form did not leave those who impose budgets, and those who execute them ... yes
  8. iouris
    iouris 27 June 2020 09: 38
    Why is the effect "opposite"? He's straight. It is obvious that deindustrialization is being carried out "from above". The USSR became the initiator of this "perestroika". This is especially evident in the example of the most economically powerful region - the Ukrainian SSR and the "advanced" Baltic republics, where Soviet enterprises were demonstratively dismantled. The same is trying to start in the USA (Gorby is with us).
    The next stage is depopulation.
  9. Grading
    Grading 27 June 2020 09: 53
    Quote: Rebel
    Quote: bald
    Whatever troubles are, there is goods, but there is a merchant. That's just the compassion must be discarded and flirting with large suppliers of hydrocarbons.

    That's right Vladimir! They wanted to frighten us with a drop in oil prices .. The gentlemen of Russia didn’t succeed in preparing these provocations for a long time ..

    Correctly, you need to encourage yourself more "THIS is a breakthrough!" "Long Live Negative Growth" More Meehan's Frenzy!
  10. alone
    alone 27 June 2020 11: 02
    Someone always needs free oil .. Those who need free oil have already taken it for a long time and have received real money on each barrel .. For example, China, it also received $ 8 for each barrel .. They wrote about it ..
    P, S. I read recently that the authorities of the Russian Federation decided to increase the number of oil storage facilities ... if this had been done say 10 years ago, China would not have to sell so much oil for -8 dollars per barrel
    1. Serg4545
      Serg4545 28 June 2020 04: 40
      Quote: lonely
      Russian authorities decided to increase the number of oil storage facilities ... if this were done say 10 years ago, China would not have to sell so much oil for -8 dollars per barrel

      Ahhh. How many mentally ill people are on the site!
      Of course, asking you to provide evidence that the Russian Federation supplied at least one liter of oil with a surcharge on its part is useless?

      // Well, crazy, what do you take // - quote from Vysotsky.
  11. imobile2008
    imobile2008 27 June 2020 18: 30
    Meanwhile, at one of the gas stations gasoline from 43 went up to 52 rubles per liter. I read in the states up to 15 rubles per liter collapsed, then with their salaries. This is what for me for 1 penny a liter
  12. nikvic46
    nikvic46 27 June 2020 20: 20
    For a long time, oil and gas will occupy an honorable place in the economy of any country. In our country, oil production is much ahead of demand in the domestic market. China, too, was once an exporter of oil. Then, the demand of the domestic market demanded to import oil. In front will be those countries that will be able to produce new products from oil and gas.
    1. agond
      agond 30 June 2020 17: 57
      New products, new products, and what will happen if you suddenly increase the service life of things, for example, at times, because you can make good-quality shoes and wear their favorite ten years in a row without taking off (seasonally) or say the marble floor has been heated in the apartment for half a century will not be erased, or a solid car is approximately like a Dobl car with which, after 40 years, it’s a pity to leave, that is, you should get away from one-day things