Russia Says It Can Weather $25 Oil

[Wiz]

Russia Says It Can Weather $25 Oil
For Up To 10 Years

Now that both OPEC+ and OPEC no longer exist, and it's a free-for-all of "every oil producer for themselves" and which Goldman described as return to "the playbook of the New Oil Order, with low cost producers increasing supply from their spare capacity to force higher cost producers to reduce output", the key question is just how long can the world's three biggest producers - shale, Russia and Saudi Arabia...

... sustain a scorched-earth price war that keep oil prices around $30 (or even lower).

While we hope to get an answer on both Saudi and US shale longevity shortly, and once the market reprices shale junk bonds sharply lower, we expect the US shale patch to soon become a ghost town as money-losing US producers will not be solvent with oil below $30, assuring that millions in supply will soon be pulled from the market, moments ago we got the answer as far as Russia is concerned, when its Finance Ministry said on Monday that the country could weather oil prices of $25 to 30$ per barrel for between six and 10 years.

The ministry said it could tap into the country’s National Wealth Fund to ensure macroeconomic stability if low oil prices linger. As of March 1, the fund held more than $150 billion or 9.2% of Russia’s growth domestic product.

Incidentally, this may explain why over the past two years, Putin has been busy dumping US Treasury and hoarding gold: he was saving liquidity for a rainy day, and as millions of shale workers are about to find out today, it's pouring.

Original posted zerohedge

[msmoby]

Wiz, posting from Zeroclue and Globalmisinfo does not a fact make ..

The Kremlin can only 'afford' to withstand such a price if :

1/ The populous are prepared for the austerity that WILL ensue

2/  Russia needs to find other raw material / manufactured product to sell at a profit ..  She is hardly competitive with her neighbours to the east, south or even west ..

3/ Russia needs a thriving 'middle class'

[andrewfi]

Russia has made it clear that the stabilisation fund (I might have the specific name wrong - I won't go check it) can manage to support deficits of sub-$30 oil for several years without needing to cut significant spending elsewhere. (whoops, Wiz named the fund and the relevant stuff above, I didn't reread it before posting)

As most people probably know by now, fossil fuel exports are now a pretty small part of the Russian budget and GDP.

As most people already know, given the point above, Mystic's second point is not really true. More is usually better but the current situation is nowhere near as bad as he wants people to believe.

Russia's middle class is too small, but it is growing. The price of oil will have little effect on that aspect of the economy.

Cue Mystic with some imaginary friends who just happen to be eminent economists sitting at his kitchen table right now laughing at my post for some imaginary 'howler'.

Overall, from what I have seen, this OPEC crap was the initiative of the Saudis. The Russians wanted to maintain the status quo and not reduce production further. While it is certain that their economists and analysts will have gamed the Saudi situation even before the meetings took place, we can be pretty sure that it was not the Russian plan to impact US unconventional oil production. However, I am sure that there will be some satisfaction at the manner in which this is playing out.

The Saudis wanted to get a higher price per barrel to support their economic needs. They are now in the situation of having to make up the revenue and profit by increased volume. It may well be that the Saudis have taken aim at US production with the goal of once again being the swing producer. The Saudis clearly want to displace Russia in the Far East as part of the needed gains in volume and thus market share. The Russians will not let that happen.

Any discomfiture in the United States from the Saudi actions will be a bonus for Russian planners and statesmen.

[Wiz]

Wiz, posting from Zeroclue and Globalmisinfo does not a fact make ..

The Kremlin can only 'afford' to withstand such a price if :

1/ The populous are prepared for the austerity that WILL ensue

2/  Russia needs to find other raw material / manufactured product to sell at a profit ..  She is hardly competitive with her neighbours to the east, south or even west ..

3/ Russia needs a thriving 'middle class'

Mystic Meg

Why don't you start sorting out your own life and stop expressing views which are not based in first hand experience?

It appears that your new wife could not stand the cold weather and left you alone for sunny place and you are stuck......in the UK. Didn't I tell you that she will not forgive you for that photo?

The people in Russia are doing well for themselves without your advice, judging from the pensions that are paid! My MIL is on nearly 20 K Rubles a month and for years she has stopped using her Britishe debit card!

Have you given your good advice to your friend.. VVP?

I am surprised that Boris did not invite you to give him your professional advice on how to overcome the Coronavirus problem.....

 

[AvHdB]

Below is part of a post from 2TallBill, it gives some background and crosses some t’s and dots some i’s.

Perhaps a more interesting question is what will the world look like post Wuhan Virus. Will the world economy coming roaring because of pent of demand? Will we retreat into an insular mentality? Perhaps a somber Dark Age is the coming Brave New World.

The Saudi/Russian oil disagreement is still in place. There are
a ton of theories out there as to what, why and how this is
going on.

OPEC and Russia have been cooperating in holding back oil
production to maintain prices. They've called this OPEC+
With a mild winter and the corona virus demand has dropped
and prices have gone down.

OPEC+ met in Austria and the Saudi's asked for additional cuts
in production and Russia balked. The Saudi's increased production
by a bunch and the oil fight was no. There are as many theories as
there are reporters opining on this and calling their opinions news.

Every time I start developing a theory about how things are shaking
out, I find reports that tend to weaken my theory.

Here is a sampling of the news, or more accurately opinion pieces
that are masquerading as news.  The Forbes and VOX pieces seem
to be the least factual/plausible. 

There are theories that there is a grab for China/Asia market share.
There are reports that Russia was asked to take a giant share of the
proposed production cuts and there seems to be more than a little
bit of dick measuring going on.

Saudi Arabia has tried to undermine the US shale oil market in the
past but various reporters have decided that Russia must be trying
to hurt them now, because you know Russia = bad

Saudi Arabia’s Oil War Could Bankrupt The Kingdom
http://oilprice.com/Energy/Energy-General/Saudi-Arabias-Oil-War-Could-Bankrupt-The-Kingdom.html


War With OPEC Can’t End Well for Russia
http://www.themoscowtimes.com/2020/03/16/war-with-opec-cant-end-well-for-russia-a69636


What's behind Saudi Arabia's oil price war with Russia?
http://www.aljazeera.com/programmes/countingthecost/2020/03/saudi-arabia-oil-price-war-russia-200315114308947.html


Saudi Arabia is starting a reckless oil war with Russia — but the US
is also a target
http://www.businessinsider.com/saudi-arabia-starting-oil-war-with-russia-us-also-targeted-2020-3


Saudi Arabia-Russia Oil Price Feud Hits U.S. Economy Hardhttp://www.forbes.com/sites/thomasduesterberg/2020/03/13/saudi-arabia-russia-oil-price-feud-hits-u-s-economy-hard/#6224e24f52a6


The Saudi Arabia-Russia oil war, explained
http://www.vox.com/2020/3/9/21171406/coronavirus-saudi-arabia-russia-oil-war-explained

[andrewfi]

Yeah, some of Bill's links were interesting but suffered from the hindrance of being counterfactual and deliberately misleading. Perhaps Mystic has gotten a freelance job writing about any old crap that doesn't need to be true in order to please the outlet's paymasters.

No, I am not going to deconstruct any of them, nobody's going to pay me to do it - but that's a problem. Who has the resources to pull apart such material in the aim of truth?

I know that Mr Putin has recently said that the non-systemic opposition is as important in Russia as the legitimate opposition, but some outlets really take the piss.

[msmoby]

The people in Russia are doing well for themselves without your advice, judging from the pensions that are paid! My MIL is on nearly 20 K Rubles a month and for years she has stopped using her Britishe debit card!

As our leader seems determined to protect the 'experts' on RU who haven't been there in a decade  ...I'm guessing my point must have been too accurate ..

Using a RU bank card in the UK ?  You allow your beloved to lose far too much of her £50/ week pension in crappy bank fees and exchange rates ?

[dcguyusa]

Note that in 1991, $25 oil would have made Saddam less hostile to OPEC.  Price is all relative   

[AvHdB]

The people in Russia are doing well for themselves without your advice, judging from the pensions that are paid! My MIL is on nearly 20 K Rubles a month and for years she has stopped using her Britishe debit card!

Using a RU bank card in the UK ?  You allow your beloved to lose far too much of her £50/ week pension in crappy bank fees and exchange rates ?

ms either you are stupid or English is a language that does not come naturally to you. Nowhere does Wiz imply or state what you interpret. Why not get some kind & benevolent person to explain the paragraph to you.

Perhaps Rosco or Andrew will step up?

[msmoby]

ms either you are stupid or English is a language that does not come naturally to you. Nowhere does Wiz imply or state what you interpret. Why not get some kind & benevolent person to explain the paragraph to you.

AvHdB

Why do you feel to prove your inattentiveness ?

Wiz, hasn't been to the Rodina in a decade and suggests I don't know what I'm talking about re RU 'middle class' that emerged, started travelling abroad - lots ... sees and doesn't forget ..then scratches their heads when they read/ view 'opinions' of the places they've seen with their own eyes on state run tv ..

As for his beloved Wife's pension...  Do you have a RU bank account ....?   Have you ever used it outside Russia?  Tried to withdraw cash on it ..?  IF she worked in the govt sector she'd have a Mir card - which is designed to NOT work in W.European, N.America, etc., 


'Thank you' ..

[Texan77]

I wonder how 25 dollar oil will play out when Russia like the rest of the countries of the world loses about 20 per cent of it's GDP do to the coronavirus.

[Wiz]

The people in Russia are doing well for themselves without your advice, judging from the pensions that are paid! My MIL is on nearly 20 K Rubles a month and for years she has stopped using her Britishe debit card!

As our leader seems determined to protect the 'experts' on RU who haven't been there in a decade  ...I'm guessing my point must have been too accurate ..

Using a RU bank card in the UK ?  You allow your beloved to lose far too much of her £50/ week pension in crappy bank fees and exchange rates ?

Moby

I have told you many times to stop playing with your Skype company........ because the end result is, as they say in Greece,  "too much Malakia goes up and affects your brain."

Where did I say that MIL has it's own British Bank account and Debit Card?

I have said several times  that I have created an account for her with my bank and she is using MY debit card to take cash out or pay bills. Is that Clear?
 
BTW I am not looking around to find a cheap money transfer company, like you do because the simplicity of my arrangements makes life very easy for MIL. I can afford the few extra pennies for peace of mind, especially the past 2 years that I stopped smoking, unlike you who argue for $7 dollars......... 

Do you have any idea how much a month it costs us to pay all bills for my wife's flat in Ufa?

20,000 RUB to GBP = 218.103 British Pounds todays exchange rate.

Isn't that enough for her to live comfortably?

You obviously also forget that my wife has a family with which we communicate almost daily.....

As far as I know most people in Russia have their own or family homes......and depends where do they live!

Do I need to go to Russia to understand how the live has improved........ well when was the last time you went to Russia?

Stop trying to be Mr Know all!

[msmoby]

I have told you many times to stop playing with your Skype company........ because the end result is, as they say in Greece,  "too much Malakia goes up and affects your brain."

Where did I say that MIL has it's own British Bank account and Debit Card?



I have said several times  that I have created an account for her with my bank and she is using MY debit card to take cash out or pay bills. Is that Clear?

MADNESS....  Do you not read ANY of the tips / advice guys who have wives / living expenses in RU proffer ..?  I expected not ..  continue in ignorance. 

[readers will have noted folk talking about revolut, transferwise, opal transfer, etc et .....  sending GBP to Rouble bank accounts and losing FAR less in currency conversion and withdrawals ]

BTW I am not looking around to find a cheap money transfer company, like you do because the simplicity of my arrangements makes life very easy for MIL. I can afford the few extra pennies for peace of mind, especially the past 2 years that I stopped smoking, unlike you who argue for $7 dollars......... 

   What is simpler than withdrawing roubles from a RU bank account .....  or paying her bills online ? 

Thank you or demonstrating your herd mentality and inattentiveness ... the 'stress' over 20 Lari was being asked for it - to buy petrol - when already VERY late for the only train to Armenia ...

Do you have any idea how much a month it costs us to pay all bills for my wife's flat in Ufa?

20,000 RUB to GBP = 218.103 British Pounds todays exchange rate.

Isn't that enough for her to live comfortably?

You obviously also forget that my wife has a family with which we communicate almost daily.....

As far as I know most people in Russia have their own or family homes......and depends where do they live!

Do I need to go to Russia to understand how the live has improved........ well when was the last time you went to Russia?

Stop trying to be Mr Know all!

According to our 'leader' only he knows best about N.Korea .. so YES ..

I only have an idea how much an eight year old apartment  in Sochi costs and with the lift fees, electric, water, common expenses, IP TV and fast internet... it is NO WHERE near £200 / month..


Now, *I* was referring to the mentality of folk and the plight of the emerging middle class ....   The kids born in the late 90's have travelled widely outside the RF - they are THE most vocally 'anti' how their nation is run ..    How many of 'em do YOU know ?.,, 

[Wiz]

Moby, I have already posted that my MIL is getting around 20 K Rubles pension a month and for years she has stopped using my British debit card!

All bills for the flat never costed us more than 3500 Rubles a month and that includes, electricity, heat, water, lift and cleaning charges and also..... Fiber cable, TV, very fast internet and also telephone bills.

Well Ufa is not the cosmopolitan Sochi and my MIL is not going out and about visiting expensive restaurants etc, like you do, so her pension is good enough to live comfortably, so she has not used my Debit card for ages.....1-2 years. All bills are paid directly from her Russian Pension bank account.

I don't bother to read the tips ....as for an extra £ 2-3 a month baboushka does not have to worry and run around......she is only 81 yrs for your info.

I have already hard wired her Skype and the PC it's on all the time. All I have to do is....call and skype opens Auto without  ringing ......so we can keep an eye on her.

Look Moby, sometimes you have to realise that it's better my wife to go alone......without me. and enjoy her time with her Mother, friends and family!

At the end of the day... if they are happy.... it's fine with me.

 

[msmoby]

All bills for the flat never costed us more than 3500 Rubles a month and that includes, electricity, heat, water, lift and cleaning charges and also..... Fiber cable, TV, very fast internet and also telephone bills.

Hmm, now I think you're BSing us.. or haven't a clue abut costs in Russia .. either that or Sochi s MUCH more expensive than Ufa ..

V pays more than this for apartments in Siberia


Sochi apartment: ( average - over a a year)
Mobile phone 500R
Lift 400R
Fibre-optic internet and IPTV ( incl prem channels ) 750R
Electric 2200R
Water 380R
Cleaning/ common expenses 1100R

That's when it's occupied

I don't bother to read the tips ....as for an extra £ 2-3 a month baboushka does not have to worry and run around......she is only 81 yrs for your info.

..and you keep proving your lack of reading ..

'We' - that's those of us who send dosh to RU - use peer to peer services that do not involve Banks' rip off exchange rates and NO 'running around' is necessary in Russia ... the money 'appears' in Roubles ... no withdrawal fees .. no exchange rates ... SIMPLES ..

The saving is considerable over a year ..

 

Look Moby, sometimes you have to realise that it's better my wife to go alone......without me. and enjoy her time with her Mother, friends and family!

At the end of the day... if they are happy.... it's fine with me.

 

Wiz, you've posted enough times why you won't go .. Visa hassles, etc., Yet you tell us you 'know' how folks feel about life ....  If you don't interact with folk - HOW do you 'know ...  ?


My circle of contacts in Russia is considerable - biz and personal .. and current ..

Quoting a v. popular Russian:

" Russia is willing to cancel schools and unis because of corona but won’t cancel the BS referendum regarding the new dumbass constitution, who would’ve thought"

[AvHdB]

It seems for the first time in its history it seems Gazprom reported a loss over a quarter. From the Financial Times of November, 2019

Gazprom profits slump 45% on lower gas prices and sales to Europe

Russia’s gas giant Gazprom suffered a 45 per year-on-year drop in its net profit in the third quarter of 2019 due to lower gas prices and a drop in sales volumes to Europe.

The company, which holds a monopoly on pipeline gas export in Russia, made Rbs211.8bn ($3.3bn) in net profit attributable to its shareholders in the July to September period, it said on Friday. The company’s revenue from gas sales fell 16 per cent on the year in the third quarter to Rbs1.6tn.

The profit decline reflected a fall in export volumes and gas prices, which nearly halved on European spot markets and the selling price in long-term contracts also reduced. Gazprom’s export prices are still largely oil-linked, and reflect oil price drops. Oil prices lost 18 per cent on the year in the period, and 10 per cent in the first nine months of 2019.

Lower gas sales volumes also weighed on the overall profits. Gazprom’s exports to Europe and Turkey, its main export markets, dropped 6 per cent on the year to 53.6 billion cubic meters in the third quarter, continuing the trend of the previous quarter despite approaching winter, when European and domestic gas demand traditionally increases.

From Reuters, 14 May, 2020

Gazprom's natural gas exports slump 19% in first quarter

MOSCOW (Reuters) - Natural gas pipeline exports by Russian energy giant Gazprom plummeted by almost one-fifth in the first quarter against the backdrop of weak demand, a source familiar with the data told Reuters on Thursday.

According to the source, exports from Gazprom to Europe, including Turkey, reached almost 40 billion cubic metres in the first three months of the year, down 19% year-on-year.

Gazprom, which accounts for around 35% of the European gas market, declined to comment on its first-quarter exports.

The company has said it expects its natural gas exports to decline by around 16% this year as the coronavirus crisis hit global demand.

Gazprom also almost halved its gas transit via Ukraine, a key exporting route, in January - April, to 15.5 billion cubic metres, according to Ukraine’s gas pipeline operator.

The state-controlled gas company sees its exports, mainly to Europe, falling to 166.6 billion cubic metres (bcm) in 2020 from around 199.2 bcm last year.

It said it was caught up in a “perfect storm” of warm winter season and the global outbreak of the coronavirus.

The reduction shifts Gazprom further away from its long-term target of 200 bcm in gas exports to Europe, a key source of revenue for the company.

Reporting by Vladimir Soldatkin; Editing by Emelia Sithole-Matarise

[msmoby]

Andrewfi refers to this Stability Fund, which was akin to a rainy day fund, according to the Krelin - to be used in a time of crisis...

So, when Corona came along, with the double whammy of the Oil/Gas price crash and less usage due to industrial production down during lock down any any subsequent recovery, it'd be time for the 'Stability Fund' to be brought into action, right ? .. NO.. when asked why many folks aren't getting financial help from this fund for 'non working days' (The  Russian state does not refer to 'lock downs' ) .."you do not understand what the 'Stability Fund' is for "


VVP is sat in the Kremlin stating that as of 23rd May, "it's back to work time" and pulling the rug out from underneath the Governors of regions who have implemented tougher regimes.

IF Russia has a 'plan' to survive this.. it most certainly isn't supporting businesses asked to pay for staff who aren't working ..

[Danchik]

Are we talking gas or oil?

Russia still have some of the lowest productions costs in the world for oil around $15-17 depending on your source.

$40-50 a barrel is the sweet spot to balance the budget for oil prices for Russia as they sell it in dollars and too high a price will appreciate the rouble and compromise the exchange return.

[Danchik]

My circle of contacts in Russia is considerable - biz and personal .. and current

[Danchik]

All bills for the flat never costed us more than 3500 Rubles a month and that includes, electricity, heat, water, lift and cleaning charges and also..... Fiber cable, TV, very fast internet and also telephone bills.

That's about right, especially for a pensioner. A little higher in Moscow.

My expenses for all that is actually less than your MIL's, but I'll keep it a secret how I manage this.

[msmoby]

My circle of contacts in Russia is considerable - biz and personal .. and current

Unlike Danchik, video and photographic evidence supports MY contention... 

Haven't you got any mates who support VVP's 'non-working holidays' and are expected to pay the staff ..?

[AvHdB]

Danchik, There are a number of articles regarding Gazprom. The one from the Financial Times of last year, I included as way of background and an indication that the problem is longer term. It seems the main drag on the bottom line is indeed the gas side of the business.

I sort doubt though there is any energy company that is running at a profit today.

[Steveboy]

All bills for the flat never costed us more than 3500 Rubles a month and that includes, electricity, heat, water, lift and cleaning charges and also..... Fiber cable, TV, very fast internet and also telephone bills.

Hmm, now I think you're BSing us.. or haven't a clue abut costs in Russia .. either that or Sochi s MUCH more expensive than Ufa ..

V pays more than this for apartments in Siberia


Sochi apartment: ( average - over a a year)
Mobile phone 500R
Lift 400R
Fibre-optic internet and IPTV ( incl prem channels ) 750R
Electric 2200R
Water 380R
Cleaning/ common expenses 1100R

That's when it's occupied

I don't bother to read the tips ....as for an extra £ 2-3 a month baboushka does not have to worry and run around......she is only 81 yrs for your info.

..and you keep proving your lack of reading ..

'We' - that's those of us who send dosh to RU - use peer to peer services that do not involve Banks' rip off exchange rates and NO 'running around' is necessary in Russia ... the money 'appears' in Roubles ... no withdrawal fees .. no exchange rates ... SIMPLES ..

The saving is considerable over a year ..

 

Look Moby, sometimes you have to realise that it's better my wife to go alone......without me. and enjoy her time with her Mother, friends and family!

At the end of the day... if they are happy.... it's fine with me.

 

Wiz, you've posted enough times why you won't go .. Visa hassles, etc., Yet you tell us you 'know' how folks feel about life ....  If you don't interact with folk - HOW do you 'know ...  ?


My circle of contacts in Russia is considerable - biz and personal .. and current ..

Quoting a v. popular Russian:

" Russia is willing to cancel schools and unis because of corona but won’t cancel the BS referendum regarding the new dumbass constitution, who would’ve thought"

My circle of contacts in Russia is considerable - biz and personal .. and current ..


Moby's contacts in Russian law enforcement ..




Moby's Contacts at the Kremlin




Moby's contacts within the Russian music industry




Moby's contacts for the International Russian business association..

[AvHdB]

Gazprom is a big vertically integrated petrochemical firm, it will survive.

Steve, Great images, but I wonder does ms know so many people? Av

[andrewfi]

The secret is hidden in the name Gazprom does gas.

Gieb the way that gas us used it us very likley that the pricing model will continue to change.

Until recently, 3 or 4 years ago as I recall, the price of gas was set as a fixed proportion of that of oil. That linkage has been breaking down.

Gas is used for baseload functions in society - heating, power generation etc. The need for gas is diverging from oil and may well become more valuable.

Gas is, in large part, seen and treated as a byproduct of oil extraction. That's also changing. But what it means is that the major cost of gas is not its extraction but its transport. Russia controls the largest distribution networks in the world. The marginal cost of 1000 BTU of gas is very low, although the capital cost of the network is high.

That's important because the marginal cost of shipping gas as liquid is high.

What does that mean?
It means that the sunk costs of infrastructure leaves a large profit for suppliers using pipes.

Gazprom have made a loss because of unusual circumstances. They will continue to decouple the price of gas from that of oil. They will go back to making a profit because their product is essentially free.

Companies and governments that rely upon ships and costly liquification/gasification infrastructure and vessels cannot compete on cost in the medium or longer term.

The oil and gas sector is important to Russia it is about 16% of gdp, half that of 5 years ago - but still very significant. The government reckons that they can support current oil prices for anything between 4 and 10 years within their budget plans. Of course, they prefer a higher price.

They are likely to cut back on the expensive Arctic gas and oil expansion, but that's manageable too, its not like fracking.