Russia six months after the failure of the Doha talks again trying to find a common language with Saudi Arabia to stabilize oil prices. After the meeting of Vladimir Putin and Prince Mohammed bin Salman parties agreed on a joint statement on “the need for close interaction”, which has become almost a sensation, but can be interpreted in different ways. Previous experience casts doubt on the reality of freezing oil or other coordinated actions, but the chances are still there, as the two countries have a problem with filling the budget.
Russia and Saudi Arabia yesterday restarted talks to freeze production of major oil producers to stabilize prices. Energy Minister Alexander Novak and Khalid al-Falih made a joint statement in which general words spoken about the need to coordinate the efforts of the major manufacturers.
According to Mr. Nowak, specific parameters will be discussed during an energy forum in Algiers in late September and the OPEC meeting in November. “It could be freezing tools, instruments establishing ceilings (dobychi.- ” b “), even tools such as the decline in production”, – said Alexander Novak, explaining that the options considered freezing for three, six months or more at the level of one of the months of the second half. “This is a historic moment, in my opinion”, – the minister added. The resumption of talks on the production freeze supported by other OPEC countries, including the United Arab Emirates and Kuwait, whose opinion is usually not incompatible with the leader of the organization in Saudi Arabia. After Brent joint ministerial declarations are added 3%, but at the end of the day the increase was only 1.3%, to $ 47 per barrel.
Such a sharp convergence, particularly strange after the debacle in Doha in April, when the unexpected behavior of the Saudis disrupted the emerging agreement, apparently, was the result of negotiations between the President of the Russian Federation and the influential Saudi Prince Mohammed bin Salman on Sunday. Vladimir Putin has in recent days made several statements that do not hide the fact that Russia would like greater coordination of major oil producers.
Nevertheless, it is still unclear whether Saudi Arabia is ready to move away from its policy of retaining market share, which it holds from the middle of 2014, in favor of price support. Until now the main stumbling block in all discussions on the coordination was Iran, which insisted on its right to increase production to dosanktsionnogo level of 4 million barrels per day (in July was 3.6 million barrels). It did not suit Saudi Arabia does not want to lose market share. Yesterday Vladimir Putin said that Iran considers the demands of justice.
The fact that Saudi Arabia’s position is ambiguous, says the statement of Khalid al-Falih that in freezing production right now is not necessary, but “the market is moving in the right direction.” This gave many analysts reason to believe yesterday’s agreement with Russia and the continuation of verbal intervention “going in circles” (see. “Kommersant” on August 9).
Nevertheless, some analysts believe that now conditions for the deal better than in April. “Both countries are mined at historic highs, and the price of oil for any of them is not profitable due to the imbalance of budgets”, – says Karen Kostanyan from BofA-ML, noting that the Saudis have already achieved our goal – to stop the rapid growth of oil shale in the US production .
For Russia, the difference between $ 50 and $ 40 per barrel of principle – will have to make serious executed with an acceptable deficit of about 3% in the first case, the budget for the next few years, otherwise the Ministry of Finance additional spending cuts.
“We see that Iran has almost reached dosanktsionnyh levels of production, now the volumes will grow very slowly, so not so important whether the country will join the deal,” – said Valery Nesterov from Sberbank Investments Research. The expert believes that Iran will be able to achieve the desired level of production in just one or two years. According to Valery Nesterov, the task can be agreed to fix prices at a stable level of $ 50 a barrel, that comfortable for OPEC and the Russian budget (assumes a price of $ 40 per barrel). At the same time this level of price will limit opportunities for US shale oil producers to increase production. The agreement with the Saudis is also important in political terms, as long as the history of cooperation between Russia and Saudi Arabia in the oil and gas sector is not marked by any practical results.
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