Tuesday, 11. October 2016
Russia will change its strategy and wants to help the global Oil flood. The prices are on the rise. The sustainable turnaround in the market is not yet in sight. Not only because President Putin has already earlier made similar announcements.
In the Oil market movement: Two giants among the competing Oil-producing countries to practice the shoulder-to-shoulder. After the most important Opec state Saudi had Arabia, just over a week ago in view to reduce the amounts of Oil, announced now the Non-Opec member Russia, to the production, where appropriate, caps to stabilize the price of Oil. “Other States should do the same”, said President Vladimir Putin at the energy conference in Istanbul. “It is the only way to ensure the stability of the energy sector,” is his late insight. After Saudi Arabia, also of Moscow is, apparently, a complete strategic u-turn.
Two years in the desert have fostered sheiks and Russia with other oil producers brutally to the bet. However, the strategy to secure market shares and revenues, is not risen. The oil producers have paid for their delusional tax: The prices are always liked more. In the past year, a barrel of Oil cost less than 50 dollars, which is about half as much as in 2014. The pain threshold seems to be reached.
The possible Oil Deal between Opec and Russia is, therefore, great hopes. The mere announcement of the prices are on the rise. Russia is, after the USA and Saudi Arabia the third largest oil Producer in the world. If Moscow would reduce its funding volumes, this should fall into the weight. An agreement without Russia, would have only symbolic value. However, experts are sceptical about whether the u-turn.
now Comes the turn of the price of Oil?
Also with an Oil Deal between Opec and Russia, there are still many uncertainties. Although the throttling is to become with Putin’s announcement more likely, write the analysts of Goldman Sachs. But because of the higher production volumes from Libya, Nigeria and Iraq, it is unlikely that a Deal could align the Oil market in 2017. Given the high level of supply uncertainty in the coming year, so an agreement on the reduction of the funding amounts could even be “premature.” You could be “self-destructive”, the report says.
Not in this bet on rising prices, the reaction of the US-conveyor is taken into account, for example. You wouldn’t be bound to the agreement between Opec and Russia. You could hide a lot, going to produce, and so the rising price of Oil the most benefit, Matt Smith, to consider the raw material expert from the clipper data. The prices wouldn’t recover because there is still a lot of Oil.
A concerted action implies that the oil producer set to rates. These have already proved in the past difficult. Each producer tries in case of doubt, cut less rather than more of its production in order to benefit the most from a rebound in the price of Oil. Hardly an Opec-state adheres to the arrangements for the funding amount, since years, is exceeded. What is within the oil cartel is difficult, due to the potential Treaty partner with other States.
Also, Russia has failed several times in the past agreements. Even after the terrorist attacks of September 11. September 2001, decided not to cut production, contrary to his announcements. The same is true for the financial crisis of 2008, which caused the markets to collapse. Crude oil is Russia’s main export. Oil and Gas have to Finance 40% of government spending. Concerted actions were previously a luxury, the Moscow obviously meant to be able to not afford. The question is, how serious is Putin now. At least his energy Minister rowed back now. Throttling will not for the time being considered, said Nowak, a day later in Istanbul. The reduction in funding would be an Instrument of Opec.
The hopes of a sustained recovery in the Oil price could be dashed so quickly. Then, if the words are not followed by deeds. The next Opec Meeting is in seven weeks. In this time, Russia, and Saudi would have to prove Arabia, that it was serious, so Smith from the clipper data. A few barrels of Oil would disappear from the market. Or, at least, production quotas are turned on already agreed-upon amounts.
And one reason is Russia, at least, is not a guarantee for a rising price of Oil. The state is the largest Producer of oil, but there are also a number of independent producers, for example, the number two, Lukoil. “Russia’s possibilities, the production is very limited”, says Alexander Kornilov, Ölanalyst at the Moscow trading house of Anton. The Deputy chief of the Russian energy group Lukoil, Leonid Fedun, signaled, in the meantime, however, the green light: “All the Russian oil producer will cut production,” provided that the government resolve the throttling, he said. Mikhail Leontyev, Vice President of Russia’s Rosneft’s largest oil producers, announced simply that his company will fulfill a decision from Moscow to the Freezing of the Oil.
market participants view the developments, however, optimistic. Also, Opec is taking the Russian offer, apparently seriously. Without the two giants, a Freezing or a reduction in the production would have no value at all. Secretary-General Mohammed Barkindo is that Putin has learned. Since then, Moscow had broken its previous promise to have changed much, “we can’t live in the past,” said Barkindo.
Goldman Sachs sees no Alternative. On Wednesday, Putin’s energy Minister Novak will meet with his Saudi colleague, Khalid al-Falih as well as other energy Ministers on the topic. According to insiders, the Opec wants Russia reduced its production of 200,000 to 300,000 barrels per day. Currently, 11.1 million barrels per day are produced. Falih believes that a reduction in the flow at the end of November at the Opec Meeting in Vienna will be announced. It was “unthinkable” that the prices could then rise by 20 per cent to 60 dollars per Barrel, he predicted.
conversely, the analysts of Goldman Sachs believe that prices will fall below 43 Dollars a barrel should Opec and Russia do not agree. The throttling is coming, but other oil producers to close the gap, will stagnate the price for a barrel of U.S. Oil in the next year, at least, at around $ 52 per Barrel. For the ailing coffers of the Oil States this is better than nothing. Prices on old highs are expected to only be reached if there’s an elephant round, with the US producers. And which is not in sight.