Saudi Arabia surrenders in oil confrontation with Russia


In the first decade of January 2021, Moscow gained de facto control over the world oil market and a dominant position, writes American expert Tom Luongo in his blog.


This is much more important than the storming of Capitol Hill and the riots in the cities of the United States. Joe Biden will be inaugurated, after which the era of Donald Trump will end. The "restoration of Barack Obama" will take place. But let's be honest, it was obvious to all Americans from the very night of the vote, when the confrontation began.

With the departure of Trump, the control of the United States and its allies over the oil markets also ends. After the start of the Coronapocalypse, oil production in the United States and other countries began to decline.

Daily oil production in Russia fell by about 2 million barrels. At the end of 2020, it is about 10,27 million barrels. But the main thing here is not the volume of "black gold", but their cost price, because the one who has the lowest marginal production costs can dictate prices. Russia has the lowest production cost, adjusted for the exchange rate.

The Energy Information Administration under the US Department of Economics (EIA) can confirm that the break-even oil price in Russia is $ 42 per barrel, and in Saudi Arabia - about $ 64 per barrel. But even this is not the main thing. The oil industry in this country relies on domestic the economy and the local ruble. This is the main advantage of the Russian Federation.

For three years now I have been “hitting the drum” that the Russian currency is its main weapon in the oil wars. Russia is less vulnerable as the ruble absorbs fluctuations in spending and income.

As for Saudi Arabia, its rial is still pegged to the US dollar. Consequently, Riyadh was trapped. This also applies to American domestic oil producers.

Access to cheap capital has ceased and interest rates in the US will only rise. This gives Russia a good advantage over its competitors.

This is why the Saudis decided to unilaterally reduce crude oil production by 1 million barrels. per day. At the same time, Russia and Kazakhstan, together increased production by 75 thousand barrels. per day. And do not be confused by the insignificance of the increase, because the main thing is the message.

Riyadh no longer dictates prices as it did before due to its market position. Moscow seized the leadership, this is already obvious. Saudi Arabia surrendered, or rather capitulated in the oil rivalry with Russia, and the Brent mixture is already sold at $ 57 per barrel. Now Texas will be a pariah, not Iran or Venezuela, and oil demand will not recover this year.

I predict that Washington, during Obama's third term, will be even more belligerent toward Moscow than it was even under Trump, if at all possible. The Russians won an important victory over the Saudis and now their eyes will be turned to the United States, the American summed up.
  • Photos used: Roy Luck / https: //www.flickr.com
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  1. 123 Online 123
    123 (123) 14 January 2021 12: 52
    +2
    Moscow de facto gained control over the world oil market and a dominant position

    Not completely yet, but we are moving towards that. This means that the phrase "petrodollar" is becoming an anachronism.

    The Russians won an important victory over the Saudis and now their eyes will be turned to the United States, the American summed up.

    They have long been directed there, the author is slightly disingenuous. Or is everything great with the American oilmen?
  2. gorenina91 Offline gorenina91
    gorenina91 (Irina) 14 January 2021 13: 39
    -5
    Daily oil production in Russia fell by about 2 million barrels. At the end of 2020, it is about 10,27 million barrels. But the main thing here is not the volume of "black gold", but their cost price, because the one who has the lowest marginal production costs can dictate prices. Russia has the lowest production cost, adjusted for the exchange rate.

    - Personally, I didn't understand anything ... - This is Russia's lowest production cost ... of oil ??? - Taking into account the "correction for the exchange rate" ??? - And how did Russia suddenly become honored to "correct the currency" ???
    - Isn’t it because last year she shipped a colossal amount of Russian gold to Great Britain ??? - This is the "correction" ... - The Saudis turned out to be clearly smarter in this aspect ... - They simply allowed Russia to sell their oil at a price below the cost of producing this oil ... - and even squander their Russian gold ... - in order to to somehow save the face of a global hydrocarbon producer ... and keep the same dollar rate ... - for the entire world community (and for the same Saudis ... - including) ... -Hahah ...
    - Or maybe Russia will just start trading its oil at the price of a world ounce of gold ... - It's just absurd to tie directly the cost of a barrel of oil to the cost of an ounce of gold ... - Maybe there will be crazy states in the world; who will "buy" oil from Russia like that ... -Hahah ...
    - Yes, there are no such ... - China does buy from Russia for its candy wrappers-yuan; and even then not all ... -And more and more tends to sell his Chinese junk on barter ...
  3. Angelina Salivan (Angelina Salivan) 14 January 2021 16: 04
    +2
    Misfortune never comes alone. Riots in America itself, the virus is such a high mortality rate, and then there is oil. All the troubles at once to America. It will not be easy to get out of such a crisis.
    America always has one way out - a war so small as to distract its population. They are always good at it. So that the whole world needs to be on the watch. After all, Iran, North Korea, and maybe somewhere in Africa will knock on the head to carry "their democracy."
    After all, they have a dream to make the whole world as "democratic" as they are. Again the death of people. But Americans know better who needs what. And if something goes wrong, they will say that they were mistaken, what can you do.
  4. Dmitry S. Offline Dmitry S.
    Dmitry S. (Dmitry Sanin) 14 January 2021 16: 05
    0
    According to Bloomberg calculations based on IFRS reporting data for 2019, the cost of producing a barrel of oil from the three largest Russian companies does not exceed $ 12 per barrel. For Rosneft, this figure is $ 11,3 per barrel ($ 3,8 OPEX and $ 7,5 CAPEX), for Lukoil - $ 10,2 per barrel ($ 3,7 OPEX and $ 6,5 CAPEX), for Gazprom Neft - $ 9,8 per barrel ($ 3,8 OPEX and $ 6 CAPEX).
    BCS Express

    The author has muddled something with the cost price
  5. valeriy ufimtzev (valeriy ufimtzev) 14 January 2021 16: 20
    0
    The USSR was safely destroyed after the collapse of oil prices and the short-sighted economic policy of the Central Committee! Russia now faces the same problem ...
  6. Sergey Latyshev Offline Sergey Latyshev
    Sergey Latyshev (Serge) 14 January 2021 16: 28
    -1
    Eh ..... The article is anonymous, but in the text:

    I've been hitting the drum for three years

    Another victory over the SA, but for some reason the ruble is falling to their real value all the time.
  7. Semyon Semyonov_2 (Semyon Semyonov) 14 January 2021 17: 24
    +1
    let's break our back, too, there is no choice.
  8. cmonman Offline cmonman
    cmonman (Garik Mokin) 14 January 2021 17: 24
    -1
    From the article:

    As for Saudi Arabia, its rial is still pegged to the US dollar. Consequently, Riyadh was trapped.

    Riyadh no longer dictates prices as it did before due to its market position.

    Saudi Arabia surrendered ...

    And what, then, should SA do to survive? She came up with a gingerbread for investors that Russia can only dream of in its wet dreams!
    Today...

    Saudi Crown Prince Says Kingdom Offers $ 6 Trillion Investment Opportunity Over Next Decade

    www.reuters.com

    These opportunities are part of the young prince's Vision 2030, which aims to end the kingdom's dependence on oil and transform it into a global investment power.

    The prince, known in the West as MBS, plans to create new industries and develop domestic projects that will create jobs for millions of Saudis through the Government Investment Fund (PIF), the kingdom's sovereign wealth fund, which acts as the main vehicle for increasing investment. at home and abroad.
    PIF will fund 85% of these opportunities with the private sector in Saudi Arabia, while the remainder will come from capital investment from Gulf and worldwide investors, the Saudi Press Agency reported citing the Prince's speech.
  9. Uneven Offline Uneven
    Uneven (VADIM STOLBOV) 14 January 2021 17: 34
    -1
    The cost of Russian oil is one of the highest in the world and is at least twice as high as in Saudi Arabia.
    https://www.rbc.ru/economics/12/11/2019/5dc97f199a79476d28b869cc.

    Russian exporters benefit from a low ruble exchange rate, since they incur the main costs in rubles, and receive profits in dollars.
    In theory, the Central Bank can raise the dollar rate to two hundred rubles. Oil workers will be covered in chocolate, but what will happen to import-oriented industries?
  10. Alexzn Offline Alexzn
    Alexzn (Alexander) 15 January 2021 13: 43
    -1
    The Energy Information Administration under the US Department of Economics (EIA) can confirm that the break-even oil price in Russia is $ 42 per barrel, and in Saudi Arabia - about $ 64 per barrel.

    Absolute stupidity! These values ​​correspond to budgetary expectations, and not to the cost of oil production, which in the SA is somewhere around 2-3 dollars / bar, and in Russia 10-12.

    Russia is less vulnerable as the ruble absorbs fluctuations in spending and income.

    Controversial thesis. The ruble depreciates, but the rial does not - strange. And the events of the post-Soviet period show how it amortizes when shock absorber collapses are regular.

    Saudi Arabia surrendered, or rather capitulated in the oil rivalry with Russia, and the Brent mixture is already sold at $ 57 per barrel. Now Texas will be a pariah, not Iran or Venezuela, and oil demand will not recover this year.

    Who is this nonsense set for? Saudi Arabia decided that lowering volume would generate more profit at the expense of price — the usual seller approach so far has subsided in price wars. How the price of $ 55 / bar (to be correct - $ 45 / bar in 2019 prices) will solve the problems of Venezuela, which even at 100 managed to get into the well .... How will this price help Iran? Why will Texas have problems if the fall in the dollar exchange rate is in the USA's favor?
  11. Cucumbers Offline Cucumbers
    Cucumbers (Cucumbers) 15 January 2021 14: 24
    0
    I already wrote about this - the Saudis, until the noise in the states subsides, decided to sell less oil for free. Ours have a different strategy - they want to sell more carbon before buyers switch to green energy. (Novak voiced his position) They do not particularly care about the ruble exchange rate, because it only affects Russians. For example: do you want a TV, go to the store, and there was 3 (three) yesterday and today 5 (five) Why? The dollar has gone up.
  12. caiman Offline caiman
    caiman (buf) 20 January 2021 11: 18
    0
    I don’t understand why they write such a blatant lie, the cost of oil production in Saudi Arabia is $ 17 per barrel and not $ 64, as they write here, even schoolchildren know that the Saudis extract very cheap oil.