Traditionally, the Russian Urals variety was several dollars behind the price of the Brent reference brand. But at the end of June the situation changed dramatically. The reason for the excess of Russian grade quotes over the value of the Brent reference brand is determined by three main factors. First, Russia, by agreement with OPEC +, significantly reduced the production of liquid hydrocarbons and brought production to a minimum since 2002. As a result, a deficit of high-sulfur raw materials was formed on the world energy market, so its cost began to increase sharply. Secondly, in connection with the new American sanctions against Venezuela, which hold almost two dozen tankers from this country at sea and do not allow delivering more than 18 million barrels of “black gold” to consumers, many importers increased fuel purchases from Russia, which provided an additional incentive for its rise in price. Thirdly, American shale producers, due to falling demand caused by the coronavirus pandemic, have reduced production by 2 million barrels per day since March and filled black gold storages to capacity. As a result, the cost of the Russian Urals variety exceeded $ 43; North Sea Brent quotes remained in the region of $ 40–41.
On the one hand, high prices for their own raw materials give Russia some advantage over other participants in the oil market, on which the rule applies: it is better to sell one barrel for $ 50 than two for $ 25. On the other hand, by reducing exports, our country is losing its position in the global black gold market. According to Reuters experts, the growth of Urals quotes is forcing owners of European refineries to reduce the purchase of Russian hydrocarbons in favor of alternative counterparts, including Brent or the American brand WTI, which are now competing in cost. If earlier traditional Urals buyers have repeatedly experienced a sharp rise in price for the Russian variety and tried to wait out the high prices, now it is more profitable for them to reconfigure the equipment for light fractions of “black gold” and save on future purchases of raw materials.
According to financial analyst of Finam Group of Companies Sergey Drozdov, at present the price situation of “black gold” is at a crossroads. On the one hand, as quarantine measures are lifted in the world, industry and transportation will come to life – therefore, demand for “black gold” will increase. On the other hand, many expect a second wave of coronavirus to hit, which again could plunge the economy into suspended animation. Accordingly, the prerequisites for the growth of Urals oil quotes depend on which scenario is being implemented.
However, it is not worth counting on the fact that in the future the price of Urals will please with prices exceeding world analogues. “Brent is a benchmark grade of quality oil that has been traded on the London Stock Exchange since the mid-1970s. The system of price coordinates is counted from it. Historically, the cost of Russian brands has always been 5-10% lower, ”explains the head of the Alpari IAC Alexander Razuvaev.
A decrease in production by US companies could have a positive effect on Urals – according to the US Department of Energy, a record reduction in the number of operating drilling rigs observed over the past four months threatens with a loss of up to a third of shale production, due to which Washington is trying to gain a leading position in world oil production. More than 15 largest raw material holdings of the country have reduced their budgets for the development of new deposits by an average of 50%. In the next two years, the United States expects an inevitable decline in production.
“Brent quotes before the end of the year can exceed the level of $ 50, although the cost of Urals will be slightly lower. The budget deficit in our country, calculated on the basis of oil prices in the region of $ 41–43, will be leveled. However, it will not be possible to completely avoid the loss of Russian GDP, which is estimated at 5-10%, ”Drozdov warns.
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