The ‘New OPEC+ Deal and Future of Oil Business in Russia’ report has been added to ResearchAndMarkets.com's offering.
The situation in the oil market develops rapidly. In early March, Russia refused to renew the OPEC+ deal on the terms proposed by Saudi Arabia - but joined it after a month on terms five times worse. Demand for oil on the global market began to collapse in March because of the coronavirus, and Saudi Arabia essentially declared a price war on Russia.
Saudi oil came to Europe at a discount, which completely destroyed the pricing mechanisms for Urals crude. The price of physical supply to Europe plunged below US$10/bbl. As a result, the confidence that Russia is ready to withdraw from the deal, to wage the price war, that the competition will not be endured by the Saudis and American shale oil producers was deflated literally within a month.
So a new OPEC+ deal was made which was supposed to remove almost 10 million bpd from the market. Yet it did not really increase the prices. Furthermore, after the prices collapsed in the US market, the price of the physical supply of Russian oil again returned to a level below US$10/bbl.
Russian oil had never been so cheap during the period of Vladimir Putin's rule. Meanwhile, it is with horror that Russian oil companies are waiting for May: on the one hand, they have to cut production by 1.8-2 million bpd, which is an unprecedented voluntary limitation. On the other hand, this will not restore the global prices even to the early March level.
The fall in global demand will be huge, perhaps even over 30%, as long as the coronavirus pandemic is not stopped. Oil has lost price volatility: the collapse in prices cannot stimulate growth in its consumption.
But the most interesting developments may begin later when demand starts gradually recovering in summer and autumn. Having temporarily abandoned a huge number of old wells, the Russian oil industry will not be able to restore production quickly and inexpensively. This may make a return to the European markets problematic. Competition in the Chinese market will become seriously more intense too.
This is indeed a moment of truth for the industry.
For more information about this report visit https://www.researchandmarkets.com/r/h5hilg