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Russia Says It Can Weather $25 Oil

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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:

--- Quote from: msmoby on March 12, 2020, 05:36:27 AM ---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'

--- End quote ---

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.....

 :laugh: :laugh: :laugh:

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.


--- Quote from: 2tallbill on March 16, 2020, 09:31:21 AM ---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

--- End quote ---

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