RUSSIA (OBSERVATORY) – Russia and OPEC will hold a regular meeting on April 20. This is the key moment for the market: do you need to decide whether to continue to support high oil prices or is it time to diverge?
Russia and OPEC have achieved, perhaps, their main goal – raising oil prices, and significant. The first talks about this appeared in early 2016, when quotes of oil futures collapsed around $ 30. Now the prices for “black gold” have more than doubled – to about $ 72.
The agreement “OPEC +” decided and another important task – almost eliminated the excess supply.
This week, the next meeting of OPEC and the Russian Federation will be held, where further actions will be discussed. Experts are inclined to believe that the participants of the agreement will continue to limit production, despite the achieved goals.
Although analysts warn that the price increase could play against OPEC, stimulating suppliers from the US or undermining demand, the ministers who meet in Jeddah on April 20 will focus on ways to extend their cooperation, Bloomberg writes.
This may include new benchmarks for stocks that extend the contraction regime, and laying the foundations for an alliance that will last for years. Any recommendations this week should be ratified at the full panel meeting in June.
There are other incentives to keep the strategy: according to the IEA, in the first quarter of the year, OPEC countries earned almost $ 400 million more per day than a year ago, thanks to higher oil prices. Income to the RF budget last year amounted to approximately 1.2 trillion rubles. ($ 19.5 billion), according to the Ministry of Energy.
However, do not forget, and many experts also said this that it is extremely difficult to get out of such an agreement. The oil market is extremely speculative, and any refusal to limit production may cause a collapse in prices.
However, there is another opinion, according to which Russia should not support an agreement on limiting production.
Firstly, we quote the words of the head of LUKoil Vagit Alekperov, who last fall declared that he was afraid of high oil prices and advocated a smooth exit from the deal to reduce oil production of OPEC +.
“I am frightened today by both the low price and the very high price, and I personally do not support the price being 60 or 70 dollars, which can lead to the same results as in 2014. Therefore, it was necessary to enter the agreement in time, but and smoothly start out of it so that the market does not become scarce, “he said, responding to a question about measures to regulate the market.
This is a well-considered position, but there are other points of view.
For example, some experts rightly believe that a further rise in oil prices will provoke a jump in inflation in developed countries, which will prompt the Central Bank to tighten monetary policy more quickly, and this in turn may catalyze a sharp slowdown in the world economy and even a recession.
Another important point is geopolitics. Russia’s rejection of the OPEC + deal seems insane at first sight. But now Russia is under threat of new US sanctions.
We must protect ourselves and inflict timely counterattacks. One of these can be a blow to the shale industry. This can be done, just by refraining from limiting production. Another is a ban on the purchase of US government bonds. This is just one of the options.
Let’s also note that the current oil prices with a fairly weak ruble have already led to budget surpluses that allow you to gain time.
Now, oil prices in rubles are near historical highs.