Tango in Vienna

Next week, the OPEC headquarters in the capital of Austria will have a meeting of oil producing countries, including Russia. Its results will largely predetermine the dynamics of oil prices in the coming months, and therefore the course of the Russian ruble, for which the cost of a barrel is still a decisive factor. At the end of September, at a meeting in Algeria, OPECs previously agreed to reduce the volume of their own production, but for the oil market, according to his own experience, this does not mean at all that this will happen. In addition, all participants in the upcoming meeting in Vienna are afraid that if they reduce their own prey, the released place on the world market will soon be occupied by other manufacturers. First of all, those who do not participate in any negotiations at all. ​

Prior to the meeting of the Oil Providing countries at the OPEC headquarters in Vienna - only a few days, it will take place on November 30, however, any options for its outcome are still absolutely likely: a complete failure and an agreement on “freezing” prey at certain levels, and an agreement on its reduction.

Rather, the agreement with the OPEC can be built in such a way that Russia will only “freeze” its prey at current, very high levels, while the OPEC countries agree to a slight reduction in their own prey.

But with such a scatter of expectations, some options are already “laid down” by the market in the current oil prices? After all, the market always looks forward ...

Vasily Tanurkov , Deputy Director of the Group of Corporate ratings of the analytical credit rating agency (AKRA), oil market analyst:

- It cannot be said that they have an absolutely optimistic scenario. But quite confidently we can say that - and not the most pessimistic. The dynamics of oil prices in the last two weeks indicate, rather, that expectations are quite positive. We saw at the same time the strengthening of the dollar and the rise in the cost of oil . In a normal situation, this does not happen, the price of oil, as a rule, falls when the dollar grows. Therefore, in my opinion, about $ 5 at the current prices is the “prize” that reflects the current expectations of market participants. Probably, of course, this is not a scenario for reducing production. But if the countries agree on its “freezing”, then most likely, there will be no more significant new price increase from current levels.

5 dollars of “expectations”, as you say, at the current prices of $ 48-49 per barrel-this is very much, more than 10%. If you continue this logic, then, in the case of negotiations in Vienna, can prices fall strongly? ..

Vasily Tanurkov:

- Indeed, prices can go down strongly. Indeed, usually, if the market expects something relatively “good”, but the opposite occurs, then the reaction arises appropriate. And then the current “prize” in the price can turn into its opposite - a discount. That is, in the case of the most negative outcome of the meeting, if there is no agreement, you can expect a fall in prices even up to $ 40 per barrel.

Andrey Polishchuk , oil market analyst, Austrian bank Raiffeisen :

- In my opinion, the market is still skeptical of the prospect of “freezing” prey. Rather, the expectations are such that if the “freezing” is announced for the OPEC participants (possibly with the accession of Russia), then in practice this recommendation will most likely not be observed. As happened before, when the quota was installed, but in fact, in a month or two we saw that not all participants in the oil cartel observe it. I think about this the market focuses on today. Therefore, if the “frost” is declared, then only a small increase in prices is possible, or they plus minus will remain at the same levels. And when in a month or two the next statistics of oil production in these countries will come out, the market will most likely be disappointed.

And if the meeting in Vienna ends, in fact, without any serious solutions, what can be the market reaction, according to your ideas?

- If there is a complete failure in the negotiations, and the OPEC countries will not agree either with themselves or with Russia, then, I think, it is worth expecting a rollback of prices to levels below $ 45 per barrel.

To agree that Russia occupies their share of the market by actually not “paying” anything for this, and even “guarantee” her higher prices due to a reduction in the OPEC offer ... The same Saudi Arabia will clearly not go to this.

If the OPEC countries this time somehow limit their production, then oil prices can increase to $ 60 per barrel, Bloomberg said this week in an interview with Bloomberg this week Executive Director of the International Energy Agency (IEA) Fatikh Birol. But he immediately added that such an increase in prices will lead to an increase in oil production in the world, especially the shale oil in the United States . Moreover, American companies do not participate in any negotiations with OPEC or other countries at all. All the participants in the meeting in Vienna are well aware of this. According to your ideas, for them this, however, is not yet a reason to refuse to limit their own production? Of those considerations that any agreement can maintain prices-at least for some time ...

Vasily Tanurkov:

- I think that this is still a factor in favor of reaching an agreement ... Well, simply because the current situation with the sale of oil is already very difficult for OPEC countries, they had a lot of budget problems. Moreover, if in 2014-2015 it was possible to say that the entire excess of oil on the world market is formed precisely due to the growth of production in the United States, then in 2016 there is no reason to think so. The current production of OPEC countries has now reached many years of maximums , while mining in the United States, on the contrary, has significantly decreased. And if we evaluate how much OPEC has grown over the past two years, it turns out that the entire current excess of oil in the market is, in fact, its additional offer from OPEC.

Andrey Polishchuk:

- Of course, they fear that with an increase in oil prices (as a result of “frost” or reduction in oil production in OPEC countries), production in the United States may increase. And in fact, American companies will simply take the share of those who “froze” or reduced their prey on the world market. This is the main fear of the OPEC participants, which prevents them from agreeing.

But there is another factor: today, few people imagine the level of prices at which the Slantsev oil company in the United States will really be ready to significantly increase production. Either it is $ 50 per barrel, or $ 60 or even higher ... Accordingly, OPEC members can somehow “freeze” their prey, and take further steps based on the real dynamics of oil production in the United States. After all, it is possible that at prices and at $ 50-55, we will not see special production in the United States. And that this can only become the level of some of its stabilization ...

If we evaluate how much the production of OPEC has grown over the past two years, it turns out that the entire current excess of oil in the market is, in fact, its additional offer from OPEC.

Russian Energy Minister Alexander Novak said at a conference in Moscow on Thursday that an excess of oil in the world will be approximately 1 million barrels per day (with global demand, according to current estimates of the IEA, 97 million barrels per day), while at the beginning of the year it amounted to 1.8 million barrels. It is clear that no one can give the exact assessments of this “canopy” of this “awnings”, but, nevertheless, if we proceed from such, then this “canopy” has almost doubled in a year in less than a year. Now, if the OPEC suddenly decides to fulfill his own plans, declared at a meeting in Algeria on September 28, then - purely arithmetic - this excess of oil can be reduced to a minimum if it does not disappear at all. But this is only arithmetic ...

In your opinion, how high is the probability of a certain separate agreement - only OPEC countries? Or, conversely, it is unlikely to take place if it is not supported by other countries participating in the negotiations? First of all, Russia ... After all, President Vladimir Putin just a few days ago announced the readiness of Russia for “freezing” , but not to “reduce” his own prey, which the country of OPEC achieve from it ...

Vasily Tanurkov:

- It is important to understand that the OPEC countries, in fact, have two goals. Firstly, stabilization of oil prices, and secondly, still preserving their market share. If the OPEC countries, first of all, Saudi Arabia, will be sure that the reduction in their oil supply in the market will be “compensated” by other manufacturers, then, from their point of view, there is simply no sense in such an agreement. And here we are talking primarily about Russia: both in view of the scale of Russian production, and due to its steady growth-both the current and the one that will probably last another two or three years. Indeed, without any agreement with the OPEC, Russia will still be able to increase its own prey until 2019. Therefore, it is necessary to agree to ensure that Russia occupies their share of the market by actually “paying” nothing for this, and even “guarantee” her higher prices due to the reduction in OPEC offers ... The same Saudi Arabia will clearly not go to this.

Andrey Polishchuk:

- It is unlikely, in my opinion, that Russia will agree to reduce its prey. Rather, the agreement with the OPEC can be built in such a way that Russia will only “freeze” its production at current, already very high levels, which will completely suit Russian oil companies, while the OPEC countries agree to a slight reduction in their own production. Mainly from Saudi Arabia. This option, it seems to me, can, in principle, arrange everyone ...