Chance for Russia: China creates the largest oil buyer in the world


Passions, heated up to the limit in spring, around world prices for “black gold” have recently somewhat diminished. Quotes per barrel are on average at over 40 dollars and in most countries, economy which are more or less rigidly “tied” to energy exports, humbly pray that it will not get worse. At the same time, of course, secretly dreaming of a new price increase.


However, there is reason to believe that the current lull will soon end and the “great oil redistribution” will continue with renewed vigor. To whom and what are the impending changes? Let's try to figure it out.

USA: the patient is more likely dead than alive ...


More recently, among the American "shale" there was a sharp recovery, reaching almost the hype. Among local economic analysts, an intense discussion of rumors began that the United States oil industry, which had collapsed below all conceivable and unimaginable limits, was “just about to” revive like a phoenix from the ashes, but also “will begin a new expansion into world energy markets”. The same Primary Vision predicted that by the end of June the level of production could increase by half a million barrels per day. The Norwegian Rystad Energy, demonstrating Nordic restraint, spoke of a daily “plus” of 400 thousand barrels. Such enchanting forecasts looked somewhat ridiculous against the background of more than sad realities - according to estimates of the US Department of Energy, which is not inclined to excessive optimism, in mid-July the volume of “black gold” in the country set another anti-record, falling to 10.5 million barrels per day, which is the most low since spring 2018. In total, since the beginning of 2020, the level of oil production has declined by 2.5 million barrels per day, of which one and a half million are just “shale”, which at the beginning of June hardly produced about 7.7 million barrels per day.

The blow that came precisely in this segment of the industry can be considered the most devastating. Of the 700 fracking rigs to date, two hundred are still alive, that is, less than a third of them work. Nevertheless, as soon as the price of the oil barrel approached $ 40, some of the "shale" had their hands combed immediately. The same CEO of one of the industry’s most significant companies, Devon Energy Corp, David Hager didn’t just say that if quotes do not fall below $ 30, “there will be no new reductions.” He proclaimed that the American "shale" is determined to "regain everything" and re-enter the world markets, "filling them with oil flows from the United States." One must be a very alternative gifted person in order not to understand what kind of result such expansion can lead to in the current, barely relatively relatively stabilized situation. However, panic in this regard, perhaps, is not worth it. Unhealthy ambition is one thing, and life is another. In reality, Chesapeake Energy, one of the “pioneers” in the production of shale oil, became aware of bankruptcy the day before. Its shares on the New York Stock Exchange for the six months have fallen from 180-odd dollars to 12. Debts totaled $ 7 billion. And the lenders agreed to invest no more than 925 million in the business ... Most likely, the whole "shale" industry, which is completely unable to exist without constant financial investments from outside, expects the same situation.

Saudi Arabia: moderation, economy and no expansion!


Acting as the main opponent of Russia during the “oil war” that broke out this year, Saudi Arabia, apparently, made very solid conclusions from everything that followed its reckless actions in the process of this battle. There will be no more "attraction of unprecedented generosity" from the sheikhs. Quite the opposite - Riyadh has already announced an increase in export prices for "black gold" in July by an average of $ 6-7 per barrel. This significantly exceeds expert expectations, according to which Saudi oil should have risen in price by a maximum of $ 4. At the same time, the kingdom will reduce the supply by 10-40%, primarily to Asian markets, to South Korea and Japan. And this despite the fact that, according to data provided by the Main Statistical Bureau of the kingdom, only in the first quarter of this year, oil exports from the country in monetary terms have already fallen by almost a quarter. And the point here is not only in its "depreciation", but also in the reduction of the physical quantity of "black gold" exported from the country. “They are not going to step on the same rake”, which they clearly are not going to spring there - after all, even the neighbors traditionally supporting the Saudis today consider them to be the culprits of that price collapse, the consequences of which the whole Middle East and not only it still perceives.

In particular, that the attempt to redistribute the energy market in their favor using dumping was a “big mistake” by Riyadh, the Minister of Energy of Qatar openly said recently. However, in the kingdom and without observers from the outside, they can clearly see what the risky escapades cost - the expected annual reduction in GDP is estimated at 3.5%, and the country, which has not got used to denying anything to itself, has to mercilessly cut it off lively. The value added tax has been almost tripled, social payments have been significantly reduced, the total sequestration of the budget revenues amounted to almost $ 27 billion. It got to the point that even defense programs are now at risk, for which Riyadh has not been stingy in recent years - arms purchases in the United States alone from 2017 to 2027 should have been carried out for astronomical amounts of hundreds of billions of dollars. The implementation of the ambitious Vision 2030 program was also called into question, the main goal of which is to overcome the situation when the state’s economy is almost completely dependent on oil exports. Saudi Arabia will not make any “sudden movements” that can again rock, or even send the barely afloat “boat”, which now contains all the states for which the price of a barrel is the basis of stability and welfare.

Russia: difficult times and new hopes


As for our country, the fall in the price of "black gold" by 45% since the beginning of this year, of course, could not but affect its budget. Hundreds of billions of rubles of damage has already been done to him, and this may not be the end of trouble. Nevertheless, the most pessimistic forecasts such as “the collapse of the economy”, “one hundred dollars” and the like, fortunately, did not come true. Anyway, bye. Moreover, some in the country already allow us to talk about fairly good prospects for the future. So, the head of Sberbank of Russia, German Gref, announced on the eve that instead of the initially expected fall in GDP by 6, or even all 9%, today we can say that this unpleasant figure will be half as much - 4.5% maximum. Moreover, the banker is confident that our national currency will strengthen by 10% by the end of the year and the dollar will cost no more than 60 rubles. All this will become possible with the increase in the price of a barrel of Brent to $ 60, which Gref expects, relying, according to him, on the forecasts of "serious and experienced analysts." All this, of course, could be attributed to the desire, inherent in some of our compatriots, to present the situation in a better light than is actually the case, and the tendency to some kind of "hatred" (which, however, just Mr. Gref does not suffer), if not one more news.

Almost simultaneously with optimistic statements by the head of Sberbank, news was heard that a new serious “player” would appear on the world energy market in the very near future, capable of more than significantly influencing the situation on a global scale. It is about the creation of such leading Chinese importers of "black gold" as China Petroleum & Chemical Corp. (Sinopec), Sinochem, PetroChina and China National Offshore Oil Corporation (CNOOC) an industrial group for joint procurement of energy. Considering that the total volume of oil imported into the Celestial Empire by potential participants of this conglomerate today is estimated at 5 million barrels per day, we can safely say that the world's largest buyer of this raw material is quite capable of playing a decisive role in the industry market. At the same time, according to reports, the first transaction planned by the new association will be the purchase of Russian oil extracted in Siberia. The participants in the group, as far as we know, having already passed all the necessary regulatory procedures and received approval and support from Beijing, intend to submit an application for its delivery through the East Siberia-Pacific Pipeline (ESPO) pipeline literally next month.

It is precisely because of this that the data regarding the fact that Russia has sold a record small amount of oil in the last month or two since the year 2003 is not so deplorable. This is unpleasant, of course, but quite predictable. According to estimates of the head of the European Central Bank Cristina Lagarde, the decline in the eurozone economy could reach a figure of 15%. What purchases are there? If our "black gold" right now succeeds in realizing its chance and firmly gaining a foothold in the Asian markets, it will be much more profitable and promising both in the short and long term. According to analysts at JP Morgan, by the fall of 9 barrels of world oil consumption by autumn 2021 should return to the pre-crisis level of 100 million barrels daily.

The question is which of the exporters will come to this moment with the least losses and will be ready to occupy the “space” freed up in the markets. It is unlikely that they will be Americans - the local wise men from Goldman Sachs, for example, believe that the “shale” can no longer recover from the damage it has suffered. Analysts at Haynes & Boone, an American law firm, are convinced that even a price higher than $ 30 per barrel will not save the case, and the number of bankrupt companies in this industry will exceed 2021 by 170. JP Morgan representatives are “betting” on Saudi Arabia by force of what they consider to be her country “with the lowest production costs and best reserves”, and they expect Riyadh to have a 15% share in the world market by 2025. Perhaps it will be so, perhaps not. However, in any case, Russia's chances in the current situation also look far from the worst.
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  1. King3214 Offline
    King3214 (Sergius) 30 June 2020 10: 28
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    Russia is turning east.

    Putin said this several years ago.
  2. Natan bruk Offline
    Natan bruk (Natan Bruk) 30 June 2020 11: 11
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    He laughed. It doesn’t even occur to a necrope that even if the entire shale industry ceases to exist, nothing terrible will happen to the American economy, since it is not based on hydrocarbons. But the Russian one rests on them, and the fact that the US is in trouble, the disaster for Russia .. Secondly, shale drilling rigs are quite easy to close and reopen as soon as they become profitable. They are all hedged. There is a change of owners and forward. Thirdly, technologies do not stop developing and production costs inexorably creep down. And tepericha’s ecology is not like that just now - today electric pulse technology is mainly used, which is less harmful to nature. So, the analyst from Neukropny is very so-so.
    1. 123 Offline
      123 (123) 30 June 2020 12: 02
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      nothing terrible will happen to the American economy. Shale rigs are quite easy to close and open again. They are all hedged. There is a change of owners and forward. Technologies do not stop developing and production costs inexorably creep down

      Cove about tothe scooters plowing the open spaces of the Bolshoi Theater We have heard the shale revolution for more than a year. laughing
      In the meantime, it turns out something like this - The shale revolution is inevitable, like the collapse of imperialism, Trump said, wiping his tears with a rag. crying
      Here the Japanese appreciated the situevina, the genuine sadness of the commentators is so touching, smile read, rejoice for the people. winked

      https://inosmi.ru/economic/20200629/247679369.html
      1. Natan bruk Offline
        Natan bruk (Natan Bruk) 30 June 2020 17: 22
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        Essentially nothing to say, just a stream of consciousness? Expected.
        1. 123 Offline
          123 (123) 30 June 2020 17: 25
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          Essentially nothing to say, just a stream of consciousness? Expected.

          And how else can you answer incoherent nonsense? winked
          1. Natan bruk Offline
            Natan bruk (Natan Bruk) 30 June 2020 17: 26
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            Self-critical. In fact, it is difficult to answer your incoherent nonsense.
    2. Bakht Offline
      Bakht (Bakhtiyar) 30 June 2020 20: 43
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      This has already been discussed. Yes, shale energy is easy to close and easy to open. In the presence of finance. But this is a problem. During the shale boom, $ 200 billion more was spent than profit was made. Finding investors now for shale workers is very, very problematic.
      The word hedging means nothing. This is an empty word. Tell me, who will pay the $ 200 billion loss?
      Slate exists and will be mined. Given the steady increase in oil prices. Today it is $ 60 per barrel.
      As for ecology and electro-pulse technology - this is to Greta Tunberg and reference books. Perhaps this technique will be a salvation, but it is possible that not.
      To date, slate, if it does not lie in white slippers, but it is already funeral.
      1. Oyo Sarkazmi Offline
        Oyo Sarkazmi (Oyo Sarkazmi) 30 June 2020 22: 45
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        Quote: Bakht
        Tell me, who will pay the $ 200 billion loss?

        Fed. Last year, the Fed paid the banks cash (in fact, and on the line of expenses - bought out overdue loans). That is, banks will not suffer from the bankruptcy of the shale. And they can open a new lending cycle at zero interest.
        And what. The Fed has a lot of money, the story of Lemon Brothers will not repeat when the bank earned three times as bad loans as its capital.
        1. Bakht Offline
          Bakht (Bakhtiyar) 30 June 2020 22: 54
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          Banks will not give out under shale projects. But that's my personal opinion. You can restart the shale industry at prices of $ 60. At the moment, this does not look real.
          The story of Lehman Brothers will be repeated in even larger sizes. I really like the movie Risk Limit. In the original, the name is a little different "Margin call". Personally, I was immediately captured by the beginning of the film. Because it is a real situation. I saw her personally. I advise you to look.
          Returning to the topic. The Fed can print at least a trillion dollars (he does this, by the way). But they do not go to real production. Shale mining was unprofitable initially and was supported by state subsidies. But thousands of small investors got burned. The second time no one will lend. As it was written in the book of academician Krylov, “Sheep were created to cut them.” A scam can be cranked only once.
          -----
          Shale oil exists. There is a technique for its extraction. It is a lot of it. But all this is costly and associated with environmental degradation. The price of oil is above $ 60 and it will start again. But not before.
          1. Bakht Offline
            Bakht (Bakhtiyar) 30 June 2020 23: 15
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            Even in the winter and spring there was information that the oil shale was decided to be abandoned by large oil campaigns. They have a good credit history and they can get loans at a lower interest rate. But so far they are in no hurry to spend money. This is their financial indicator (of course, only one) over the past 6 months. For one indicator it is impossible to conclude about their financial situation. But this is also information. These are the three companies that were scheduled to save oil shale. And also service Schlumberger. But at Schlum, the stock also fell from $ 40 to $ 12.

          2. Oyo Sarkazmi Offline
            Oyo Sarkazmi (Oyo Sarkazmi) 1 July 2020 09: 58
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            Quote: Bakht
            But thousands of small investors got burned.

            Not all. Those who managed to declare a probable bankruptcy before July 2019 actually wrote off debts. And they pump oil from free wells already.
            Another thing is that wells do not live long in shale. 3-5 years - that's all. It is necessary to drill new ones.
            That drilling is no longer credited. And pumping - for now yes. Hoping to change the situation. Only 40 million unemployed conjoined the market forever. Buyers disappeared, in addition, more than a trillion dollars in debt for a house / car / iPhone. In the coming year there will be a complete stop on house building, the automotive industry and the import of household appliances. No buyers ...
      2. Natan bruk Offline
        Natan bruk (Natan Bruk) 1 July 2020 08: 00
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        Well, there will be no shale (although its cost is steadily declining). AND? What will happen to the American economy? Never mind. As mentioned above, in Russia the economy is critically dependent on oil and gas, and not in America. As for hedging, I thought it was an empty word for you, because, apparently, you just don’t know what it means, what insurance is, and how property in the USA passes from one source to another.
        1. Bakht Offline
          Bakht (Bakhtiyar) 1 July 2020 09: 38
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          What is the meaning of hedging? How does this happen? Who pays for insurance? Are you the first time you hear that insurance companies in the US refuse to pay insurance due to force majeure? When hedging, losses will be transferred to those structures that guaranteed margin call. Yes, as they wrote here, the Fed can print at least a trillion dollars, but who will give them to insurance companies. They all go to Wall Street to buy back stocks of large companies. The so-called "buyback". Without this, the value of the shares of large companies will fall to zero. I saw this at the beginning of the zero. When the value of PGS shares fell from $ 40 to 50 cents. They survived only thanks to state support.
          Is Russia critically dependent on oil and gas revenues? Invalid statement. Oil and gas revenues play a large role in budgeting. But they are not the basis of the Russian economy. Is the US economy strong? This tale filled my teeth and I’ve been at war with her for a long time. 80% of US GDP is a service sector that has already been blown away. One virus ruined the US economy. The fall of oil shale in the United States means the automatic defeat of industrialists (Trump's non-election) and the victory of financiers.
          Russia will stand in the absence of oil. It will be difficult and painful, but will not lead to the collapse of the country. The collapse of the country occurs for completely different reasons.
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          No one wants to wonder why this is the strongest economy in the world for 10 years, everyone is trying to become a world gas station? At the end of 2019, the States produced the most oil in the world. Are you sure that all this growth was due to oil shale? The devil, as always, is in the details.
          -----
          You never gave ANY reasonable argument in favor of your statements. In addition to mantras about the critical dependence of Russia on oil and faith in the "first economy of the world." 40 million unemployed with 150 million active population for thought.
        2. Oyo Sarkazmi Offline
          Oyo Sarkazmi (Oyo Sarkazmi) 1 July 2020 10: 05
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          Quote: Natan Bruk
          What will happen to the American economy? Never mind.

          You are an optimist - a poorly informed pessimist. Half of the US budget is covered by sales tax. And suddenly taxes will come in a quarter less. On an annualized basis, budget revenue from sales tax will decrease by 13-15%. And if no trezheriki (small trezheris) will be bought? This is the collapse of government orders, feeders for giants.
  3. Bulanov Offline
    Bulanov (Vladimir) 30 June 2020 11: 48
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    The Chinese need to get rid of the American dollar, which was recently printed in the United States by a few more steamers. So, he will begin to steadily cheaper. Until this leads to a massive collapse, the Chinese will try to buy everything in a row on their accumulated American papers. And they will buy not only oil, but also tsvet.met. - it is easier to store it.
    1. 123 Offline
      123 (123) 30 June 2020 20: 28
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      More precisely, here citizens from the Fed say from March 16 they printed 2 trillion to buy treasury and mortgage-backed securities, as I understand it, they don’t take treasuries, they buy everything from the Fed. Another mystery is where Trump 2,9 trillion took to support the economy in connection with the coronavirus.

      https://www.federalreserve.gov/newsevents/speech/clarida20200521a.htm

      Now I wonder how many trillions fit on one ship?
      1. Oyo Sarkazmi Offline
        Oyo Sarkazmi (Oyo Sarkazmi) 30 June 2020 22: 47
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        Quote: 123
        Now I wonder how many trillions fit on one ship?

        By check? So, a trillion will fit in a purse! fellow
        1. 123 Offline
          123 (123) 30 June 2020 23: 59
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          By check? So, a trillion will fit in a purse!

          Or just the numbers on the computer. what
  4. gorenina91 Offline
    gorenina91 (Irina) 30 June 2020 11: 51
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    Chance for Russia: China creates the largest oil buyer in the world

    It is about the creation of such leading Chinese importers of "black gold" as China Petroleum & Chemical Corp. (Sinopec), Sinochem, PetroChina and China National Offshore Oil Corporation (CNOOC) an industrial group for joint procurement of energy. Considering that the total volume of oil imported into the Celestial Empire by potential participants of this conglomerate today is estimated at 5 million barrels per day, we can safely say that the world's largest buyer of this raw material is quite capable of playing a decisive role in the industry market. Moreover, according to available data, the first transaction planned by the new association will be the purchase of Russian oil

    - Horror !!! - Just awful!!!
    - China already has Turkmenistan, which has flown through the gas ... so that its future generations will curse their ancestors ...
    - And now China is also acquiring Russia as a "second Turkmenistan"; but already as "oil Turkmenistan" ... Thus, Russia more and more begins to depend on China ... - And China, when it starts producing Iranian oil, it will pump Russian oil for nothing ...
    - Yes, China is clearly defeating America ...
    - And it’s not worth talking about Russia ... - You can talk about China, what China is doing, what is happening in China; but about Russia it will be possible to say something later - already by the residual principle ...
    1. Oyo Sarkazmi Offline
      Oyo Sarkazmi (Oyo Sarkazmi) 30 June 2020 22: 51
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      Quote: gorenina91
      but about Russia it will be possible to say something later - already by the residual principle ...

      They forgot about the USA. There are already 25 million Chinese, and 800 thousand arrive every year. Soon, the Chinese will become the main electoral force in the United States. If the order is received.
      1. Natan bruk Offline
        Natan bruk (Natan Bruk) 1 July 2020 08: 02
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        In the USA, the Chinese do not want to know the Chinese regime, and it certainly cannot give any orders to those who leave there.
        1. Oyo Sarkazmi Offline
          Oyo Sarkazmi (Oyo Sarkazmi) 1 July 2020 10: 10
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          Quote: Natan Bruk
          he certainly cannot give any orders to those who have left there

          And what, their not?
          The Chinese simply do not participate in the vote, there is no interest. But if the Chinese will be promoted to governors or mayors? Then the diaspora will wake up, and the Democratic Party will not be greeted.