Organization countries – Petroleum Exporting Countries yesterday did not reduce the amount of oil production quotas, keeping it at 30 million bbl. / Day for at least the next six months. Explain to the world that the culprit of this fall in prices is shale oil to the US and that the market itself stabilizes, oil ministers left no opportunity to revise the quota in the case of serious differences of supply and demand. Russian authorities, meanwhile, are preparing for budget cuts based on the price of $ 80 per barrel, and oil experts say about the existing margin of safety in the oil industry.
After the five-hour talks held yesterday at the headquarters of OPEC in Vienna, cartel participants could not agree on the maintenance of world oil prices. “In order to restore market balance Conference decided to maintain production at 30 million bbl. / Day, established in December 2011,” – said after the meeting the representative of Hassan Abdul Hamid, noting that cartel participants can change the decision “in the case of major changes in the balance of the oil market. ” Contrary to expectations, OPEC did not make statements about tighter control of production in excess of quotas (in October, the actual figure of 250 thousand. Bbl. / Day more than the agreed OPEC ceiling).
Such an outcome of the conference was predicted almost all market participants. Recall OPEC members resorted to a drastic reduction in production volumes since 2008. They did not do it and now, despite the drop in oil prices from the peak in July ($ 115 per barrel), more than a third. Last night, the cost of Brent crude fell below $ 72 a barrel – the lowest level since August 2010.
Unity positions before the meeting in Vienna was not. Gulf countries (notably Saudi Arabia – the largest member of the cartel), its unwillingness to change the quota attributed the lack of need to reduce production, naming the main cause of excess supply in the market shale oil from the United States. Representatives of Venezuela and Iran, on the other hand, advocated reducing production – in the case of reduction in countries outside the cartel. As reported by “Kommersant”, Russia two days before the summit OPEC tried unsuccessfully to persuade Saudi Arabia, Venezuela and Mexico to agree at least on a symbolic reduction in production quotas. After OPEC conference head of “Rosneft” Igor Sechin said that the potential decline in production in Russia is 200-300 thousand. Bbl. / Day.
According to experts, to quickly stabilize the market it would be enough to reduce quotas by 1 million barrels. / Day. However, according to the International Energy Agency, in the medium term basis for lower prices is not. “Reducing the price by itself spur consumption and acceleration of global economic growth will allow to increase the volume of demand in the second half of 2015,” – Johannes Benigni optimistic of JBC Energy. Reduction of quotas and rising oil prices would only further increase cost-shale production, says the expert Goldman Sachs.
On the performance of the Russian budget ending in 2014 OPEC decision will not have time to influence. Due to the high price of oil in the first half (the average price of Urals in January – October was $ 103 per barrel) and the devaluation of the budget in 2014, according to Finance Minister Anton Siluanova, will be executed with a surplus of 0.3-0.5 % of GDP. The situation with the budget-2015 is somewhat more complicated. Its costs are calculated on the basis of $ 96 per barrel, but little room for maneuver in cuts already approved state programs the government does not. Established before the fall of oil prices on the Commission to optimize budget expenditures now calculates the possibility of reducing expenditure in 2015 by 10%. Since the maneuver is limited (sequestration of social spending is not possible for political reasons), the authorities, while maintaining low oil prices promise to climb “in a jug.” Assessment Anton Siluanova, from the Reserve Fund in 2015 may have to spend 500 billion rubles. available there now 3.9 trillion rubles. Prior to this, the Ministry of Finance intends to devastate bailout reserve, which next year will be 120 billion rubles.
Thus, significant changes in fiscal policy can occur only when the layout of the next budget – in 2016. According to the head of the department of the Ministry of Finance long-term planning Maxim Oreshkin, treasury adaptation to a new level of oil prices should mean a tougher approach to spending. “The government needs to restructure the budget for the coming years, based on the price of $ 80 per barrel,” – said on the eve of Anton Siluanov. As told “Kommersant” Head of the Economic Expert Group Evsey Gurvich, only direct economic losses from reduced export earnings falling average price to $ 80 per barrel will be about $ 70 billion. For a budget 20 percent subsidence means a reduction of the average price of oil and gas revenues to $ 2 trillion rub. or 2.5% of GDP. Devaluation of the ruble can compensate for these losses by about 30%, but given the slower growth and higher inflation, budget losses may be higher.
For Russian oil companies decline in oil prices is less sensitive. Vice president of Moody’s in Russia Yulia Pribytkova explains the features of taxation – with prices as low as $ 10, revenues from exports fall by only $ 1.4-1.5 even without benefits. In this case, due to the devaluation of the ruble falling costs (in dollars) is faster than shrinking revenues. The cost of production on most deposits in Russia is still quite low – without taxes, operating expenses (excluding transportation) by an average of $ 04.05 per barrel, capital expenditures to maintain production levels – another $ 07.05, which is several times lower than that the world’s major companies, says the expert. According to the vice-president of LUKOIL Leonid Fedun, the sensitivity of Russian companies to dramatic price reductions “not very high” because of the flexibility of the ruble and the tax system. According to him, to LUKOIL production became unprofitable, the price should collapse below $ 25 per barrel.
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