Why the ultimatum of Saudis to Russia on oil is impossible


Tomorrow, April 9, a meeting will be held at which the parties to the OPEC + transaction will try to agree on a reduction in oil production in order to return quotes to a level comfortable for all players. The fact that at least 10 million barrels a day should be removed from the market, everyone agrees, the question is, due to whom it will happen.


Judging by the Bloomberg agency, Russia has been designated as “extreme”. However, as we are assumed earlier.

So, we again return to this unpleasant topic. A month ago, the Russian leadership refused to accept additional obligations under the OPEC + deal, according to which it was supposed to reduce production by 0,5 million barrels per day. Saudi Arabia responded with an increase in production and powerful dumping, as a result of which prices for black gold fell more than two times, dragging gas quotes along with them.

The "oil jihad" began, which showed a lot of interesting points. Unlike our country, the Middle East monarchies have managed to dramatically increase production volumes. Saudi Arabia added from 9,8 to 12,3 million barrels, that is, 2,5 million over the norm. United Arab Emirates - from 3 million barrels per day to 4. Iraq pumps an additional 200 thousand barrels, which totals 4,8 million. A certain conspiracy is obvious, given that Riyadh set a tough ultimatum for Moscow: now Russia is expected to reduce production not by 0,5, but by 1,5 million barrels per day.

The Saudis themselves agree to remove 3 million barrels, which, given the excess of 2,5 million, will amount to a loss of only 0,5 million. The UAE will also lose only 0,5 million barrels compared to March. And that’s all, if you take it as a minimum, hoping that the American shales will nevertheless join the agreement. But President Donald Trump bluntly stated that he did not intend to participate in the new deal, and the United States and Canada did not defiantly come to the meeting, leaving the rest to agree among themselves.

Frankly speaking, the result of the month of the oil war is not “pulling”, to say the least,. Of course, you can come to an agreement with the Arab countries with a good face, returning quotes to an acceptable level that specially trained people will imagine as a victory over the Saudis and the rest of the world, but there is an objective economic a reality that cannot be ignored.

The problem is that reducing production even by 1 million barrels per day is a disaster for modern Russia. Unlike American shales or Saudis, domestic wells will be difficult and expensive to conserve. Excess oil can be left in storage, but their capacity is not dimensionless. The reduction in oil production will inevitably lead to the fact that it is necessary to abandon part of the old fields developed since the Soviet era. In general, new ones with hard-to-recover oil will have to be forgotten.

The question will arise about the advisability of Rosneft developing Arctic projects, and this is closely related to the expansion of the infrastructure of the Northern Sea Route and the construction of the Zvezda super-shipyard in Primorye. A powerful blow will be made to the system-forming sectors of the Russian economy, part-time employees will inevitably be dismissed, which will add social tension to the crisis. Due to the drop in production volumes, the revenues of petrodollars to the federal budget will sharply decrease. At the same time, one must clearly understand that the key problem is not even the low prices for black gold, but the general recession of the world economy, which has already begun, but was intensified by quarantine measures against the coronavirus pandemic. It is completely incomprehensible when the previous demand for hydrocarbons will be restored.

Russia is making an offer that cannot be refused. But it is impossible to accept. The most unfortunate thing is that the current situation is a direct result of the state’s economic model built on oil and gas exports with an appropriate level of governance, which worked while everything was fine, but instantly stumbled over itself when everything became bad.

Now what remains is to declare war on Saudi Arabia. Joke.
Used photos: kremlin.ru
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  1. mor7d Offline
    mor7d (mor7d) April 8 2020 11: 33
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    Now what remains is to declare war on Saudi Arabia. Joke

    Of course, a joke. Where are you and where is the CA. The plane will not fly and these planes once or twice and miscalculated, and if they shot down, these will not be there, and there are no ships to get there.
    1. antibi0tikk Offline
      antibi0tikk (Sergei) April 9 2020 00: 44
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      Did you look at the map? To the United States, that of the Far East, that across the North Pole - a stone's throw. And not on airplanes, there are options faster and more reliable.
      1. mor7d Offline
        mor7d (mor7d) April 9 2020 09: 44
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        there are options faster and more reliable

        Well, this is from the realm of secret desires. You do not wish such a fate to your children and parents.
      2. Arkharov Offline
        Arkharov (Grigory Arkharov) April 9 2020 17: 50
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        On the dogs.
  2. Sergey Latyshev Offline
    Sergey Latyshev (Serge) April 8 2020 14: 14
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    What canoe?
    Recently I watched the Old, Putin told the ministers that it was necessary to reduce production by 10 million. And then all, then 0.5, then 1.5 require / ask.

    That’s a bunch of articles - We all bent, "overpowered" the shale kapets.

    Peremoga! Bent down the West!
  3. steelmaker Offline
    steelmaker April 8 2020 14: 16
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    ... that the current situation is a direct result of the state’s economic model built on oil and gas exports with an appropriate level of governance, which worked while everything was fine, but instantly stumbled over itself when everything became bad.

    The result of Putin’s rule! And this is after screwed up with Ukraine for gas. Conclusions were not made by Putin. The article is offensive and provocative in relation to FANS of Putin. And the result shows what level of education Putin’s entourage and the government have. And count on a positive outcome - no reason !?
    1. Alexander Semenov (Alexander Semenov) April 8 2020 16: 04
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      You still do not know about the enslaving terms of the contract for SP-2 and the Power of Siberia, for a long time the decisions of such rulers will go around.
      1. 123 Offline
        123 (123) April 8 2020 16: 41
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        You still do not know about the enslaving terms of the contract for SP-2 and the Power of Siberia

        So tell the public how they will pop around. yes Though the people have fun laughing
        1. Alexander Semenov (Alexander Semenov) April 8 2020 17: 01
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          And if you’re not in the subject, have fun, but somehow I don’t really ... laugh the one who laughs last.
          1. 123 Offline
            123 (123) April 8 2020 17: 11
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            laughs the one who laughs last.

            In this case, it's me. yes After all, only I laugh. laughing
        2. mor7d Offline
          mor7d (mor7d) April 8 2020 22: 59
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          Though the people have fun

          What fun is it, you have to pump oil for these children and grandchildren under these contracts for free.
          1. 123 Offline
            123 (123) April 9 2020 00: 32
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            What fun is it, you will have to pump oil and oil for your children and grandchildren under these contracts

            Dig your carrots in the sand all your life, worry about them. yes For ours do not worry, the pumping process is automated, tea, do not carry buckets. laughing
            1. mor7d Offline
              mor7d (mor7d) April 9 2020 09: 46
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              Dig your carrots in the sand

              Carrots are always growing, you don’t understand anything. Not yet grown to carrots in the sand.
  4. 123 Offline
    123 (123) April 8 2020 16: 40
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    Frankly speaking, the result of the month of the oil war is not “pulling”, to put it mildly,. Of course, you can come to an agreement with the Arab countries with a good face, returning quotes to an acceptable level that specially trained people will imagine as a victory over the Saudis and the rest of the world, but there is an objective economic reality that cannot be ignored.

    Or you can just calmly watch the Bedouins scurry around and the shale bankrupt.
    Reflections on “objective economic reality” from the lips of a “specially trained person” sound extremely funny. laughing

    Russia is making an offer that cannot be refused.

    Why not? belay Very possible. yes
    1. 123 Offline
      123 (123) April 8 2020 17: 38
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      I look, the fair-faced is contorted? Then the supplement. yes

  5. Bulanov Offline
    Bulanov (Vladimir) April 8 2020 16: 45
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    I previously proposed to Arabs, Americans and Russians 30% each, and the rest 10%. If you do not agree, then 25% of the first three and the same amount to the rest! Agree, otherwise it will be like yesterday!
  6. Observer2014 Offline
    Observer2014 April 8 2020 21: 18
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    Why the ultimatum of Saudis to Russia on oil is impossible

    I do not understand! am A month ago they beat themselves in powerful breasts and screamed at every corner, what is OUR tricky plan - to bend American shale companies? lol laughing
  7. Marzhecki Offline
    Marzhecki (Sergei) April 9 2020 07: 28
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    Quote: Observer2014
    Why the ultimatum of Saudis to Russia on oil is impossible

    I do not understand! am A month ago they beat themselves in powerful breasts and screamed at every corner, what is OUR tricky plan - to bend American shale companies? lol laughing

    This happens when "pathological amateurs" are engaged in the economy, whose level is to keep the maximum stall on the market.
    And it will burn out without subsidies from the budget ... request
  8. Marzhecki Offline
    Marzhecki (Sergei) April 9 2020 08: 21
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    Quote: Sergey Latyshev
    What canoe?
    Recently I watched the Old, Putin told the ministers that it was necessary to reduce production by 10 million. And here it’s only 0.5, then 1.5 is required / requested.

    Do you read carefully? 10 million - this is for everyone, the question is in the allocation of quotas.
    1. cmonman Offline
      cmonman (Garik Mokin) April 9 2020 22: 33
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      Sergey, thanks for the interesting article. I want to clarify your phrase:

      ... hoping that the American shales will nevertheless join the agreement.

      Under Amer’s anti-trust law, Trump cannot manipulate price - a matter of jurisdiction. When he says that “we will think,” it means that we must figure out HOW to circumvent this law.
      But whether he wants to go for it is a question. Shale wells easily overlap / open, well owners are accustomed to turbulence, the business is accustomed to drops, so there is no particular alarm.
  9. Marzhecki Offline
    Marzhecki (Sergei) April 10 2020 10: 27
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    Quote: cmonman
    Sergey, thanks for the interesting article. I want to clarify your phrase:

    ... hoping that the American shales will nevertheless join the agreement.

    Under Amer’s anti-trust law, Trump cannot manipulate price - a matter of jurisdiction. When he says that “we will think,” it means that we must figure out HOW to circumvent this law.
    But whether he wants to go for it is a question. Shale wells easily overlap / open, well owners are accustomed to turbulence, the business is accustomed to drops, so there is no particular alarm.

    You are welcome. Everything turned out, as I wrote a week ago.