The statements made today from all the main “poles” of the oil confrontation allow us to draw only one reasonable conclusion: contrary to all expectations, we should not expect stabilization in the near future.
The controversy for world markets of “black gold” is not nearly complete - it is in the phase when it is quite possible to expect a further aggravation of the conflict, fraught with completely unpredictable consequences for the economies of the countries that got into it. And besides, too much uncertainty factor contributes to everything that happens is the main “black swan” of our days - the COVID-19 pandemic.
It's time to get used to the new realities
Alas, the misfortune of all those who, in the usual way, have assessed and interpreted the main news on the "oil issue", he is in a hurry to draw far-reaching conclusions, is that the analysis is carried out in the realities of the old, "pre-coronavirus" world. That is, those geopolitical alignments that now seem to be worth forgetting forever. I confess - I myself have sinned like that. After all, it would seem that everything is extremely transparent and clear: the presidents of the United States and Russia have finally come to an agreement on the cessation of the “lawlessness” that is currently taking place in the sphere of energy supplies. We talked thoughtfully, seriously, with all possible mutual understanding and respect ... It just turned out that the agreements between the two world leaders - Vladimir Putin and Donald Trump for the final solution of the issue in the current realities are completely insufficient! Saudi Arabia, as they say, "has bitten the bit" and continues to do things that make the energy ministers stand on end in both Moscow and Washington. The flow of oil from the Middle East is not only unabated - it is becoming more powerful, despite the real needs of importers and the most basic common sense. One gets the impression that Riyadh has decided to show the rest of the world the oil "Kuz'kin mother", even at the cost of the complete destruction of its own economics. By the way, if someone thinks that the sheikhs are doing fine today, then he is mistaken in the most profound way. The oil sector of Saudi Arabia is experiencing a fall to the level of August 2009, and in the UAE, the indices reflecting its state have the lowest values in history. All other industries, at least their non-state segments, are also in deep decline and crisis.
And yet, as soon as the OPEC + “big deal” nominally in effect until April 1 ordered it to live officially for a long time, Riyadh, as it was threatened, “turned off the tap” even more - Saudi Aramco's oil supply exceeded a record 12 million barrels . All this looks like some kind of crazy bravado of suicide bombers, but this is exactly what happens. Representatives of the company write on Twitter:
We are proud to have loaded 15 million barrels into 18,8 oil tankers!
And this despite the fact that ocean fillers are increasingly falling off from the mooring wall, generally without a specific destination. Such "gentlemen of oil fortune", traveling across the seas, catch on the waves a chance that the cargo overflowing their tanks will be possible to attach at least somewhere. At the same time, Riyadh is trying hard to expose Russia as the culprit of everything that is happening and to relieve himself, his beloved. The other day, a statement was made by the head of the Saudi Arabian Foreign Ministry Faisal bin Farhan al-Said that the statement by Moscow of an absolutely obvious fact: once again the Saudi’s ardent desire to test the shale oil production in the USA for strength, “is completely devoid of truth.” It’s all the Russians to blame! They refused to agree. Why, it is completely incomprehensible - but this is precisely their malice. And we, peaceful and kind, white and fluffy, like our beloved camels ... Only one thing categorically does not fit into the framework of such "logic", though so inconvenient that it completely breaks all the "arguments" of the main diplomat Riyadh. If everything is as he says, then why is it precisely his country, which does not want to listen to anyone’s arguments, that is increasing oil production and its deliveries today? There is no other explanation than the desire to insist on one’s own worth at any cost, taking advantage of the chaos in the world.
Survive the pandemic
By the way, Washington also understands this. The same Donald Trump just yesterday, and not even on his favorite Twitter, but publicly, in the process of communicating with the press, declared OPEC "an illegal organization and a cartel," adding that "he had been against him all his life." The president also said that "this monopoly" does not just behave fundamentally wrong, but specifically "acts unfairly towards the United States." Such accusations, sounding from Washington at such a high level, rightly speaking, should have made Riyadh think hard. Especially in combination with the fact that they were expressed in conjunction with the American leader's confirmed willingness "to save tens of thousands of jobs in the United States to impose duties on any crude oil" - both from Saudi Arabia and from Russia. However, the claims made by Trump against OPEC make it clear who exactly he sees as the main culprit in the problems. Moreover, the Russians for the Americans are old and familiar rivals in every sense, but they are unlikely to want to have "a lot of Arabs who understand themselves" as an additional headache. It may turn out that just these will be taken to "put in place" - the blessing and levers for this Washington has more than enough. What can not be said about his capabilities in relation to our country ... Trump today is in an extremely delicate position - his administration is literally stormed by oil workers demanding help, support, quotas, benefits, but, most importantly, an end to the "price drop" on energy resources, which turns their business into a deliberately unprofitable occupation. As far as is known, one of the President's meetings with representatives of this sector of the economy (first of all, “shale producers”) took place last Friday and was by no means rosy.
On the other hand, representatives of oil refineries are “pressing” on him, begging not to introduce any duties - after all, then the price of gasoline will rise again. Wherever you go, there is a wedge everywhere ... At the same time, according to Trump himself, the most difficult period in the country's fight against the pandemic is "still ahead." The President speaks of "the coming week", but it is clearly felt that his optimism is becoming more and more cautious. This, however, is not surprising given that in terms of the number of infected people, the United States came out on top in the world (more than 330 thousand people at the time of this writing), and in terms of the number of deaths from COVID-19, they are also at the very top of the list, far ahead of China. In Saudi Arabia, the same UAE, according to official statistics, everything is still quite well - there are sick and even deaths from the coronavirus, but in quantities that do not come close to the horrific figures of Europe or the United States. However, it is still far from known how the situation there will develop in the future. And, by the way, the prospects of the Arab oil industry are, perhaps, much more influenced by the incidence of the virus in the countries where this oil is produced, but just in the states that until recently were its main consumers. The first quarter was the worst for energy markets in their entire existence, not so much because of the collapse of the OPEC + deal, but because of the absolutely unprecedented stagnation that gripped the world economy. The rejection of aviation fuel alone on a global scale has reduced the demand for "black gold" in a way that no trader had dreamed of in the worst nightmares. And plus another stop of industry and land transport ... French Total in early March this year closed its Grandpuits refinery, calculating that the amount of fuel that it can sell is not worth the cost of its production. Refineries are shutting down one by one around the world, including the United States. In Italy, they are already thinking about closing gas stations.
Most likely, in the current "oil war" the one who has the least "safety margin" will lose. No matter how much the Arabs flood the market with almost free raw materials, they will not be able to keep such prices forever. The dependence of the Saudi budget on oil prices is an order of magnitude higher than that of Russia. In this sense, this is a completely unjustified risk for Riyadh - the Arabs decided to dig a hole for themselves, flooding the world market with super-cheap oil. In addition, the American bank Goldman Sachs has a very original theory that in the future those energy suppliers who will be able to offer consumers more convenient logistics, and whose raw materials will be cheaper to transport, will benefit significantly in the future. Russia has undoubted advantages here, at least in relation to the European market. The next video conference in the OPEC + format is scheduled for April 9, dedicated to reducing the level of "black gold" production. Riyadh is already hinting with might and main that the virtual "meeting", originally scheduled for today, has again been postponed due to the "intractability of Moscow." The Russian side, on the other hand, does not hide its own position - all market participants, and not just one, should reduce the rate of operation of drilling rigs. Until the last moment, the problematic party was just the United States, making it clear that it was only Arabs and Russians who had to "sort things out" between themselves, and they did not intend to give up a single barrel. Nevertheless, it seems that this seemingly unshakable position has also cracked. It became known that the Texas oilmen are ready to consider reducing production at their fields by 10%. A significant number of representatives of the “shale industry” express a consolidated agreement on the decrease in activity until the price of “black gold” is acceptable for their business. If the United States will be ready to "turn on the tap" in its own country, then, I would like to believe, for the hot guys from the Middle East they will have arguments that are weighty enough to be listened to.
One way or another, but, according to serious market analysts, even the achievement on April 9 of certain agreements, the result of which will be the cessation of completely unbalanced and clearly excessive supplies, no matter where they come from, will not fundamentally solve the problem. Yes, energy prices are stabilizing somewhat, but to what extent and for how long is impossible to say now. The only way out of the crisis for oil exporters can only be the recession of the pandemic, the restoration of international and domestic transport links in the world, as well as a new "inclusion" of the economy. Only then will it be possible to talk about the need to immediately end the "oil wars" and return to normal energy markets. The one who comes to this moment with the least losses, in fact, will be able to claim the status of the winner.