Test for OPEC and Slates

Oil exporters - before the least predictable solutions in recent years

For the first time after the financial crisis of 2008, to the next ministerial meeting of the OPEC countries, which is taking place in Vienna today, so close attention of the oil market is focused. On the one hand, a long time ago the contradictions within the organization itself did not appear as clearly as today. On the other hand, the increase in oil production in other countries, primarily in the USA, reduces the previous significance of the decisions of OPEC itself, especially against the background of a slowdown in the growth of raw materials by the largest regional economies in the world or even its reduction. At the same time, OPEC still has the opportunity to make the most unexpected decisions for the market, the consequences of which can largely determine the dynamics of world oil prices.

Now the current quota of oil production by 12 OPEC countries (30 million barrels per day with the current global production of about 94 million barrels) was installed exactly three years ago-in December 2011. Then they rather unexpectedly for the market decided to simultaneously increase the previous quota by 20%at once. But in fact - only to the levels of real production of oil at that time. Nevertheless, the market responded to such a decision by falling prices at once by 6% in one day. Which, however, did not stop them from soon returning to the current trend for an increase.

Influence of influence

On the one hand, the OPEC today is no longer as powerful in the global oil market as it was three years ago, says Mark Mills, employee of the Manhattan Institute of Political Research in New York. Such a change, according to him, was the result of the classical mechanism of demand and sentences: the increase in oil demand decreased due to the general slowdown in the world economy, and the proposal, on the contrary, increased sharply due to the paper oil oil in North America.

The main task of OPEC is to stabilize oil prices for the next 100 days, but for the next 200, 300 or 400 days.

On the other hand, as a single organization, OPEC remains the largest participant in the global oil market, and therefore the most influential on it, with regard to the possibilities, can actually and quickly affect prices, reducing or increasing its own prey, Mark Mills continues. “Just the degree of this influence is no longer the same as it was three years ago.”

In the last review of the International Energy Agency (MAA) , represented on November 14, it was noted that the global oil production amounted to 94.2 million barrels per day in October. At the same time, the global oil demand in 2014, according to the current forecast of the agency, on average, will be only 92.4 million barrels per day. And in 2015, it can increase to 93.6 million barrels, which is also lower than the current production volumes.

More recently, Saudi Arabia, the largest oil manufacturer in OPEC, stated that $ 100 per barrel is the optimal price, but oil continued to rise up to $ 120, said the leading expert at the specialized analytical center Oil Price Information Service .

The reserve capacities of the shale oil industry in the United States amount to about 5 million barrels per day, while in the oil industry of Saudi Arabia - only 1.5 million barrels.

“OPEC could not bring down this increase trend, and it is doubtful that she would now be able to knock down the reducing trend, ” Klose continues. “By the way, it is also caused by a slowdown in economic growth in a number of regions of the world, which was partly the result of high prices for energy carriers.”

The actual oil production of OPEC countries in October amounted to 30.6 million barrels, the sixth month in a row exceeding the quota installed for themselves, reminds the IEA. That is, OPEC now accounts for 32.5% of global oil production, while 40 years ago, in the early 70s, it exceeded 50%.

Today, the share of OPEC itself has a greater impact on the global oil market on it, as a factor in the potential surprise of the decisions of this organization - both in one side, and the head of the raw materials department of the analytical management of the German Commerzbank in Frankfurt, Yevgeny Vineberg . Unlike factors such as an increase in production in countries that are not OPEC members, or a slowdown in economies, the significance of which changes only gradually. This factor of “unpredictability” of decisions was especially clearly manifested before the current ministerial meeting of oil exporting countries.

In the near future, the “shale revolution” will continue regardless of whether prices will fall to $ 65 per barrel or will rise to $ 95 again.

Most of the meetings of recent years have practically no influence on the market, since their results almost coincided with expectations, Winberg continues, now a variety of solutions are not excluded. “You can leave everything as it is. You can, as we, for example, expect, reduce real production to the level of previously agreed quota of 30 million barrels per day. But you can sharply reduce it - to 29 million or even 28 million barrels, such a decision would have a very strong impact on the market.” However, it is unlikely that this is possible in the current situation, Eugene Weinberg concludes, the interests of the participants in the organization itself are too different.

Barreli and budgets

Both the profitability of oil production in these countries, and the requests of their state budgets, the OPEC participants really vary very much, Thomas Klose agrees. For example, the cost of mining in a number of deposits in the Gulf region can be only a few dollars per barrel. While some countries of this region may well satisfy their budget requests at prices at $ 30-40 per barrel.

Recall that the “shale revolution” itself in the United States began in 2006, when a barrel of oil cost only $ 30.

However, the budget of Saudi Arabia, according to separate expert estimates, needs oil prices at $ 90, continues Klose, and the budgets of some other OPEC countries-and $ 130-140 per barrel. “For example, Venezuela, in order to fully ensure its own budget requests, even reducing the current OPEC production by at once by 4 million barrels per day, I think it would hardly be enough.”

According to the international currency fund, in order to balance your own budget, the most expensive oil is necessary today among the OPEC countries - $ 184 per barrel, and the cheapest is Kuwait ($ 54) and Qatar ($ 60). Iraq, according to the same estimates, requires prices at $ 100 per barrel, Iran - $ 130, Saudi Arabia - $ 106. Whereas the United Arab Emirates - $ 77, Venezuela - 117, Algeria - $ 130 per barrel.

On the other hand, it is in Saudi Arabia that the largest currency reserves were accumulated in the framework of OPEC (according to this indicator, it shares 3-4 places in the world today with Switzeria, after China and Japan-RS) , continues Thomas Klosa, so it is much easier for other countries of this organization, even surpassed, 4-5 years, a period of low oil prices, without reducing its own production. Many other OPEC countries may not withstand such “protracted competition”.

Slender oil and “lives” at the expense of new investments.

What has happened in recent months in the global oil market, a drop in prices by 30% of about $ 80 per barrel was the result of primarily the policy of Saudi Arabia, Evgeny Weinberg suggests. Its unwillingness to reduce current production, as well as the lack of signals to the market about the possibility of such a reduction in the future.

Saudi Arabia is much more concerned about the upcoming oil prices in five years than five months later, adds Mark Mills. Therefore, current prices only help her eliminate from the market those competitors who can only work at high prices. And the country has all reserves for this, starting with the fact that among large oil exporters of the world, only Saudi Arabia has significant reserve mining capacities, which in a short time can be stopped either again.

In addition, the period of low prices against the backdrop of the overall growth of the global economy, which Saudi Arabia can survive without any problems for itself, will force a lot of oil companies in the world, at least to postpone the implementation of new deposits, continues Mark Mills. And five years later, when the growth of oil demand will accelerate again, these companies will no longer be able to compete with it for new consumers. “In other words, why should Saudi Arabia reduce their own prey today when they can simply force their competitors to this?”

In the United States, for most Slantsy industry companies “breakers” prices are much lower than $ 60 per barrel.

According to available information, Saudi Arabia clearly does not intend to reduce the prey unilaterally, believing that in the current situation, such decisions should be made not only by OPEC countries, Thomas Klose agrees. In addition, it seems to him that Riyadh proceeds from the fact that with such a competitor in OPEC itself as Iran will not be signed in the near future an international agreement on its nuclear program, which would lead to the abolition of sanctions against Iran and, accordingly, the emergence of 500 thousand to a million barrels of oil per day. “Prior to the introduction of international sanctions, Iran sold 2.5 million barrels daily,” Thomas Klosa recalls. “Today it is only about 1 million barrels per day.”

Oblanstaya "strength"

The production of OPEC countries has reached a maximum over the past 13 months, which became a consequence of, in particular, the expansion of proposal from Libya and Iraq, MAA experts noted a month ago. In general, the oil supply in the world market in September almost 1% exceeded the average level of global demand for it for this year, and in October - by 2%. At the same time, three quarters of the general increase in oil supplies to the world market - to the level of autumn last year - were provided by countries that are not part of OPEC.

Experts indicate primarily to the United States, where, against the backdrop of the “shale revolution” of the last decade, the volume of production, according to the oil and gas company BP, has now reached the maximum over the past half century. According to the IEA, the business of most American companies - shale oil manufacturers remains profitable and at world prices of $ 80 per barrel.

As a single organization, OPEC remains the largest participant in the global oil market, and therefore the most influential on it.

The price struggle continues, and Saudi Arabia has recently reduced its previous prices for December deliveries to the United States, as well as for the closest deliveries to the Asian countries, says Evgeny Weinberg. According to the estimates of the industry international agency Platts, two-thirds of the total Saudi oil exports are sent today to the countries of South and Southeast Asia. In fact, the purpose of such shares of some OPEC countries, the expert believes, is the test for the “survival” of the shale oil industry in the United States with a decrease in world prices. Another thing is that their decline to the level of $ 80 per barrel is enough to slow down the “shale boom”?

According to our estimates, this may be enough, Winberg continues. The problem is that although only a very small part of all shale production in the United States at the current prices becomes unprofitable , nevertheless, they can scare away many investors who are ready to invest in it. According to the IEA, in case of maintaining world oil prices at current levels, these investments in 2015 will be reduced by 10%, thereby restraining the current, rapid growth rate of shale oil production.

The cost of mining in a number of deposits in the Persian Gulf region can be only a few dollars per barrel.

Sleep oil and “lives” at the expense of new investments, explains Evgeny Weinberg. Compared to traditional deposits, the speed of natural drop in the shale production is much higher. To maintain it requires more and more new investments. “So far, no noticeable slowdown in the US production in the United States has been noted, but it is possible that after two to three months it may manifest itself.”

Price competition measures, if you call the actions, for example, Saudi Arabia, theoretically can scare investors of the shale industry, but so far, world prices are still very far from the levels corresponding to this, Mark Mills objects. According to him, in the United States, for most companies in this industry, “breakers” prices are much lower than $ 60 per barrel, that is, a level that the current reducing trend may well be achieved. “Recall that the“ shale revolution ”itself in the United States began in 2006, when the barrel of oil cost a little more than $ 30 and the technology of shale oil production is continuously improved, quickly reducing its cost.”

Saudi Arabia is much easier than other OPEC countries, to survive even protracted, for 4-5 years, a period of low oil prices, without reducing their own production.

In the near future, the “shale revolution” will continue regardless of whether world prices will fall, say, to $ 65 per barrel or will increase to $ 95 again, adds Thomas Klose. The question is only in the pace of its development. According to the expert Oil Price Information Service, if in the near future the price of oil does not fall by another $ 10-15, then in 2016, shale production in the United States can reach 10 million barrels per day. For comparison, its current volumes, according to the US Department of Energy, are 8 million barrels per day from the total production of 9.06 million barrels in the country in early November, while the current production of Saudi Arabia is 9.6 million barrels per day.

Moreover, according to the estimates of the American Bank, Goldman Sachs , presented at the end of October, the reserve capacities of the shale oil industry in the United States now amount to about 5 million barrels per day, while in the oil industry of Saudi Arabia - only 1.5 million. That is, oil, oil on which, if necessary, can be obtained quickly, after only 30 days. Thus, they conclude in Goldman Sachs, Saudi Arabia, the world's largest oil exporter, no longer has the opportunity to reduce world prices below the level of shale oil in the United States, since any new Saudi measures in this direction will lead to the next shale expansion and the fall of the profits of Saudi Arabia itself, quoted by Goldman's report quoted Goldman Sachs American television company CNBC .

Saudi Arabia is much more concerned about the upcoming oil prices in five years than five months later.

This process began for a long time, but the fracture began in 2014 amid a sharp reduction in US oil imports from West Africa, the analyst of the investment company AGain Capital John Kilduff , the opinion of which is also given by CNBC. Slantsy oil replaced West African oil in the United States, which manufacturers quickly redirected to Asia.

In the Northern Hemisphere, where the main consumers of the oil of the world of the world are now concentrated, winter comes, and oil prices can grow somewhat regardless of OPEC solutions or, in response to a purely symbolic reduction in the cartel of its production, adds Thomas Klose. In his opinion, the real test of the current price policy of OPEC will be in the second half of next year.

The fact is, Klosa continues that if OPEC itself does not reduce production or does not be able to convince other large oil exporters of this, to the organization of non -incoming, such as Norway or Mexico, then by the middle of the next year the oil supply in the world market, according to some expert estimates, will exceed the real demand for it by about one million barrels per day, that is, by almost 1%.

In the recent past, the same Mexico could agree to the persuasion of OPEC, recalls the leading expert Oil Price Information Service. However, now, when, after a long ban, foreign companies are returning to the oil industry, it is unlikely to decide to reduce production, so as not to jeopardize their investment projects. “In other words, the main task that is facing the OPEC countries today,” Thomas Klosa believes, “is the stabilization of oil prices not for the next, say, 100 days (with this, it can be relatively easily handled), and for the next 200, 300 or 400 days.”