At what point is the war between the US and Russia over oil and gas
The point on the war between the US and Russia on oil and gas in the CER report edited by the analyst Demostenes Floros
Not just the economic crisis and health problems. Among the consequences of the Covid pandemic, the consolidation of the Russian position on the oil market will also be mentioned, as opposed to the US shale which is raising its head thanks to the stabilization of oil prices around 50 dollars. This is what emerges from the analysis of Demostenes Floros in the latest issue of Geopolitica dell'Energia of the Centro Europa Ricerche (CER).
THE RUSSIA-US ENERGY DISPUTE
Against the backdrop of the pandemic issue, a real war, as Eni's new chief financial officer, Francesco Gattei defined it, in an interview with the Financial Times on 4 January 2021, "the main conflict – of which the energy market represents a fundamental cross-section, although not the only one – it is given by the clash between the Russian Federation, whose constantly growing oil output has meanwhile exceeded the previous record set in Soviet times (11,280,000 b / d in February 2020), and the United States of America, thanks to the mining boom due to the hydraulic fracturing technique applied since 2008 ”, reads Geopolitica dell'Energia.
The Covid pandemic has in fact "literally disrupted the energy markets, exacerbating conflicts, despite the OPEC plus agreement reached on 12 April 2020 and the related updates that followed", highlighted the report. “In June 2020, we asked ourselves the following question: 'Will Russia win the oil war?' In an article published on January 5, 2021, Oilparmi highlighted 'the growing weight of the Russian Federation' in the global oil market, as well as the simultaneous decline in the influence of OPEC, as the Organization of Petroleum Exporting Countries it had taken on all the cuts decided during the last OPEC plus summit, while the Russians had on the other hand obtained an increase in their own production (and some non-OPEC allies such as Kazakhstan) ”.
WEIGHT OF OIL AND GAS ON THE RUSSIAN BALANCE DOWN TO 30%
According to the focus of the CER edited by the analyst Floros, "although it is still premature to consider Russia the winner of the oil war, to date, the weight of the Russian budget dependent on oil and natural gas revenues has dropped by 50% at 30 percent, President Vladimir Putin said at his annual December press conference. 'This means that, even if we are not completely where we want to go, we are still starting to get off the so-called oil and gas needle. If anyone still wants to see us as a gas station, then this has no real basis' he concluded ”.
RUSSIA HAS BUILT HUGE FOREIGN RESERVES
Not only. Russia, from the lack of the Opec Plus agreement in March 2020 – which among other things, the report reads, "coincided with the sale of market shares to the United States, whose unconventional output (tight oil and shale gas ), was in the meantime growing steadily – it has accumulated "substantial foreign reserves (approximately $ 563 billion, as of March 1, 2020), mainly thanks to revenues from mining revenues". And on January 8, 2021, "despite the fall in GDP of 5.2% in 2020, Russian reserves reached 597.4 billion dollars (+43 billion dollars compared to 2019) according to data provided by the Central Bank of Russia, one step away from the absolute record of 598.1 billion dollars reached in August 2008, just before the outbreak of the international financial crisis ”, highlights Geopolitica dell'Energia.
As of June 30, 2020, “gold accounted for 23% of Russian reserves while the dollar-denominated share of assets had fallen to 22% from over 40% in 2018. The steep decline is clearly part of a 'de- dollarize the Russian economy to reduce its vulnerability to US sanctions. To date, gold represents the second component of the reserves of the Central Bank of Russia after the euro, which constitutes 1/3 of the total assets. 12% of the stock is instead denominated in yuan ”.
The set of Russian international reserves “represents the piggy bank thanks to which the Russian Federation will evaluate when to possibly change its energy policy in the near future. In addition to foreign reserves, Russia availed of a break-even price ($ 41.80 / b) significantly lower than almost all OPEC plus members and the flexible exchange rate compared to the 'greenback' ".
SHALE USA PRODUCTION DOWN
On the other side of the globe, meanwhile, according to the statistics compiled by the Drilling Productivity Report disclosed by the Energy Information Administration on January 19, 2021, "the production of non-conventional US crude oil is expected to decrease by 89,000 b / d, for a total of 7,522,000 b / d, in February 2021. US crude oil output, after the previous peak of 9,627,000 b / d reached in April 2015, decreased to the low of 8,428,000 b / d reached on 1 July 2016. After that, it started to increase again to the record of 13,100,000 b / d reached on March 13, 2020, and then stabilized at 10,900,000 b / d starting from January 22, 2021 (weekly estimates) ".
STATISTICS INDICATE AN INCREASE IN THE NUMBER OF DRILLING PLANTS IN OPERATION THANKS TO THE PRICES OF CRUDE AT $ 50
According to the statistics released by Baker Hughes on January 29, 2021, "the 384 drills currently active in the United States, of which 295 (76.8%) are oil and 88 gas (22.9%), plus 1 mixed (0.3 %), are 38 more than those recorded on 18 December 2020, but down by 406 units compared to the same period last year. The statistics clearly indicate an increase in the number of drilling rigs in operation, because with the price of crude oil above $ 50 / b, US shale companies with a profitability above $ 45 / b financially cover a large part of their production (the so-called hedging) ".
INSOLVENCES OF US OIL AND GAS PRODUCERS INCREASE
That said, according to the rating agency Fitch, in 2021, "the bond defaults of US oil and gas producers will reach 15-18 billion dollars, more than double, both in the healthcare and industrial sectors".
To conclude, “in October, crude oil imports from the United States of America were 5,293,000 b / d, down by 105,000 b / d compared to September23. In the first 10 months of 2020, the average monthly imports of the US was 5,926,000 b / d, compared to 6,795,000 b / d in 2019, down from 7,768,000 b / d in 2018. and 7,969,000 b / d in 2017 ".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/a-che-punto-e-la-guerra-tra-usa-e-russia-su-petrolio-e-gas/ on Sat, 06 Feb 2021 16:47:25 +0000.