How will this affect the price of a barrel
The OPEC+ alliance of oil-producing countries, which includes Russia, following a meeting on June 2, decided to extend the agreement to reduce oil production until 2025. Although previously it was calculated only until the end of this year. At the same time, in terms of extending the deal, there are many nuances that concern our country. MK asked the expert: is this agreement beneficial for Russia and is it time for us to leave the alliance?
According to the terms of the agreement reached, the total production level of the alliance member countries should be 39.72 million barrels per day. At the same time, the total quota of countries for 2025 has nevertheless been increased. From January next year it will increase by 300 thousand barrels per day for the United Arab Emirates.
However, we are, of course, more interested in Russia. What are the conditions in the alliance for our country? Russia currently has a production quota of 9.95 million barrels per day. However, in addition to the main production quota, a number of alliance members, including our country, are voluntarily reducing production by 1.7 million barrels per day throughout 2024. In addition, Russia and Saudi Arabia have assumed increased obligations: in the first half of the year they will reduce production by another 2.2 million. In general, taking into account the voluntary reductions in production volumes, already this month Russia should be producing less than 9 million barrels oil per day.
It’s clear why all these voluntary and not so voluntary production cuts are needed. Demand for raw materials has recently been falling in the world for various reasons, and if supply is not reduced at a similar pace, the price of a barrel will collapse. And due to the speculative nature of this price, determined on the stock exchange, it can collapse so powerfully that producing countries will find themselves with nothing.
Because of this, according to most experts, the decision of the last OPEC+ meeting was not a sensation. Although the reduction in production volumes is not easy for our oil industry. To reach the planned level of oil and gas revenues (11.5 trillion rubles in 2024), we need high oil prices.
Leading analyst of the National Energy Security Fund Igor Yushkov believes that the current OPEC+ agreement will not allow the Russian super revenues from the oil and gas industry to the budget, but will not entail a deficit
“Of course, Russia is able to produce much more “black gold,” he explains. — But, obeying the decisions of the alliance, it limits production volumes.
— Without Russia, the alliance will simply fall apart, there will not even be a classic OPEC. It is difficult to imagine that without OPEC+ the classic one will continue to regulate quotas and restrictions on its participants in production.
Russia and Saudi Arabia are the largest producers within the alliance. If we go out and increase production, then other members of the alliance are forced to reduce their volumes in order to compensate for the volumes that Russia will increase. And more or less maintain current prices.
However, no one will agree to this; an “oil war” will begin on the principle of all against all. All countries will strive to produce to the maximum, this will bring down prices on the oil market, and as a result, all parties will suffer.
On the one hand, OPEC+ imposes burdens, but on the other hand, the market will not be able to exist without the alliance. It will be a shock. After the collapse of prices, we will have to live through this crisis for at least a year and a half. And wait for prices to stabilize, for those with expensive fields to start cutting production.
But we will have to survive these years somehow. How? The budget for the current and next years is drawn up with a deficit, and the country needs oil and gas revenues. No, now is not the time for such shock experiments…
— Indeed, while OPEC+ member countries are holding back production, other countries, on the contrary, are increasing it. But the alliance shows that starting next year it has planned to increase production volumes, including for Russia. For the first time in a long time — and this is important. In any case, OPEC+ will adjust its position.
— These parameters converge at $83-85 per barrel of Brent oil. Domestic oil is trading about $10 per barrel cheaper. Today, Brent is going for about $81.5.
The conclusion from the expert's words is obvious: the situation on the global oil market is tense for Russia. And adjustments to the positions of the alliance member countries may still follow. The next meeting of OPEC+ ministers is scheduled for December 1.