Translated material
Oil, not in the evening
Milana Davydova, Nikolai Manvelov
The decision of the Organization of Petroleum Exporting Countries will not allow Russia to insist on writing off debts to the Paris Club
The decision of the Organization of Petroleum Exporting Countries will not allow Russia to insist on writing off debts to the Paris Club
Last Wednesday, oil and energy ministers from the Organization of the Petroleum Exporting Countries (OPEC) held an extraordinary conference in Vienna. After consulting, the cartel decided to reduce its own oil production by 1.5 million barrels per day (about 214 thousand tons), that is, by 5.6% of the current world production.
Even on Tuesday evening, forum participants could not decide on the numbers. Venezuelan President Hugo Chavez proposed reducing production by no less than 1 million barrels per day, and Saudi Arabian Oil Minister Ali al-Nuaimi - by 1.5 million barrels. An OPEC subcommittee, which includes Iran, Kuwait and Nigeria, as well as cartel Secretary General Ali Rodriguez, recommended a reduction of 1.7 million barrels. According to leading OPEC economist Shokri Ghanem, Iraq had the most stringent demands - reducing production by as much as 3 million barrels per day. However, it was clear to all experts in advance that OPEC, which supplies oil mainly to the United States, would never support Saddam Hussein’s initiative. Kuwait believed that the optimal level of reduction would be 2 million, but the participants in the discussion agreed on the 1.5 million proposed by Saudi Arabia.
Stock analysts believe that current oil prices have already been affected by future production cuts: in New York, the cost of a barrel of crude oil jumped to $30.34 per barrel (the level of early December last year). Prices for Russian Urals oil, having risen to $25 per barrel, have stabilized at $22-23. “We do not expect a strong market reaction as a result of quota reductions, if only because most investors are ready for such a development,” Stephen O’Sullivan, a leading oil and gas specialist at the investment bank United Financial Group, told Bloomberg. At the same time, he does not believe that a long-term trend towards rising oil prices will be established on world markets. “In the medium term, prices will still continue to decline under the pressure of objective economic factors, such as a “seasonal” decrease in oil demand in the second quarter or a slowdown in economic growth in the United States and Japan - the two largest oil importers in the world. Therefore, most likely, OPEC will have to return to the issue of another quota reduction in March at its next meeting."
OPEC's decision is extremely disadvantageous for America, which consumes a quarter of the world's hydrocarbon production. The situation is aggravated by the fact that it is winter outside and, according to weather forecasters, frosts are just beginning. Now everyone is watching the weather, as American reserves of petroleum products do not cover growing demand.
Unlike the Americans, Russia is completely satisfied with current oil prices. Thanks to OPEC, the volume of foreign exchange earnings into the Russian budget in 2001 is increasing. The budget was calculated based on an oil price of $18 per barrel. And according to analysts’ forecasts, this is approximately how it will be. And oil workers even call a higher figure - 22-25 dollars.
Everything would be fine, but the current surge in prices is doing Russia, which is negotiating the restructuring of its debts to the Paris Club, a disservice. The recent systematic reduction in prices gave the Russian government a reason to complain about difficulties and ask for a delay. Allegations about the country's inability to fulfill its obligations in a favorable energy price environment could lead not only to the cessation of payment concessions, but also to the deprivation of Russia's status as a member of the Paris Club (this time as a borrower, not a lender). Moreover, some G8 countries are already saying that Moscow, as an unreliable financial partner, may be excluded from this “elite club.”