The ruble falls, the Russian central bank suspends foreign currency purchases, the government must avoid panic. The fall in the price of oil is huge. But Russia has an important reason to get involved. It is located in the USA.
On Monday, the “black man” on the stock exchanges and commodity markets, no one in Russia needed to justify the fact that Moscow’s non-agreement with the OPEC countries led to the Oil price had sunk by almost a third to a good $ 31 a barrel – more than it had since the Gulf War in 1991. Yesterday Monday was a public holiday in Russia.
However, those who watched the news yesterday or went to the 24-hour shops lost the holiday mood. Because they got an idea of what had happened there.
The ruble dropped, the euro no longer cost just under 76 rubles a piece as on weekends, but suddenly over 83 rubles. The central bank announced that it would suspend the purchase of foreign currencies for 30 days to prevent another ruble decline and to stop capital flight in foreign currencies.
And the Russian Ministry of Finance felt compelled to announce that the state could carry out its tasks even with a permanently low oil price because there was enough money in the saved state fund, called the “National Welfare Fund”.
Had Russia factored in such a scenario? The second largest oil exporter in the world consciously refused on Friday to support the Saudi Arabia-led organization of oil-exporting countries (Opec) agree to further restrict oil production in order to somewhat support the oil price burdened by the economic decline?
Has Moscow calculated that the subsidy cuts previously agreed within the framework of the alliance supported by Russia (Opec +) would no longer apply and that from April 1st everyone can pump as much oil as they want onto the market?
Fight with US shale gas producers
And Russia could count on Saudi Arabia stubbornly reacting to Russias refusal and dumping its customers in Asia almost unprecedentedly Discount would grant six to eight dollars a barrel?
If you believe the prevailing interpretation in the Russian expert world, the Russian decision-makers knew very well what they were getting into. “I am convinced that this was expected and planned,” says Kirill Tachennikov, oil analyst at the largest Russian broker BCS Global Markets, on request.
The key message was that a drop in oil prices would affect US oil producers, who have been flooding the oil market with the controversial extraction from shale rock for a decade. The US companies should be forced to lower investments and thus reduce their output.
“The Russian generals of the raw materials sector have decided to go with the Shale oil producers from the United States, ”Andrej Vernikov, Deputy Director General for Investment Analysis at Zurich Capital Management, told Ria Novosti.
Russia wants to keep market share
Indeed, heavily indebted US miners need at least $ 35 a barrel to make a profit. Due to the corona virus, they have already been in an imbalance since January. Russian companies make do with less.
And the Russian state, fueled by the epochal drop in oil prices in 2014 to less than $ 30 a barrel at the time, has planned its budget to cope with an oil price of $ 40. Saudi Arabia needs more than $ 80.
According to oil analyst Tachennikov, Russia did not act headless, but fully aware that it was Oversupply four to five million barrels a day on the world market. It was clear that the 1.5 million barrel cut in production proposed by Opec would not have been enough to restore the balance between supply and demand.
“Russias position is that this balance can only be achieved by restoring demand, not by reducing supply. And Russia would rather keep its market share than lose it to US shale oil producers. ”
100 million euros loss per day
Interestingly, that was what the Saudi Arabians intended when they turned on the oil tap in 2014. What they hadn’t counted on was that the US sponsors could endure more than expected through technological improvements. She was also surprised that the price of oil, which had dropped from $ 115 to less than $ 30 at the time, would only briefly rise above $ 70 once.
The miscalculation finally led to the following in 2016 Russia For the first time in history, he was actively involved in Opec oil cuts. At least the Opec + managed to stabilize the price to a certain extent. The building of trust was the most difficult, Russian Energy Minister Alexander Novak said in an interview with WELT.
Now the trust and thus the Opec + itself seems severely damaged. Some people in Russia blame the Saudis who, with their current proposal to radically cut production, would have blackmailed the Russians and would now suffer more from the fall in oil prices.
Leonid Fedun, Vice President of Russias second largest oil company, is counting on how much the Russians will suffer LukoilBefore: An assumed decrease in the oil price from $ 60 to $ 40 would mean a loss of $ 100 to $ 150 million a day with an export volume of five million barrels a day.