Page 9 - FSUOGM Week 05 2021

FSUOGM PERFORMANCE FSUOGM

Russian producers reap rewards

of Saudi sacrifice

RUSSIA RUSSIAN producers are in a win-win situation and expectations that OPEC+ compliance will
right now, free to ramp up output while bene- be strong as other factors.
Russian producers are fiting from higher oil prices as a result of Saudi However, the rally in crude prices could also
free to expand output Arabia’s sacrifice of market share. spur more US shale wells to come back on stream
while benefitting from Russian liquids output in January 1-28 inched in the next few months.
the price rally. up 1.1% compared with the December level to “The current price strips have been just
1.387mn tonnes per day (10.1mn barrels per enough to fire up US shale, which is set to trend
day), energy ministry data shows. The slight towards 11.5mn bpd in the next few months
growth comes after Russia and other OPEC+ from the current 11.1mn bpd now,” Rystad ana-
partners agreed to bring an extra 500,000 bpd of lyst Louise Dickson said. “This output level can
supply online starting this year. Russia was later be sustained even at a WTI price of $40-45 per
granted permission to ease its cuts by a further barrel, but with WTI prices comfortably in the
130,000 bpd over February and March, even as low 50s, we see an additional 300,000 bpd upside
OPEC’s de-facto leader Saudi Arabia pledged to risk to US supply by December 2021.”
take 1mn bpd of its own supply offline. Meanwhile, the cancellation of the Chi-
Data from the Russian energy ministry’s nese Lunar New Year events over coronavirus
CDU-TEK research unit does not provide (COVID-19) concerns will weigh down on
a breakdown of oil and condensate flow. As demand, temporarily capping the recovery in
OPEC+ quotas exclude condensate, this makes oil demand in the region.
it difficult to assess compliance. But Russia has Saudi Arabia’s gift to its rivals came as a
on many occasions surpassed its quotas in the shock to markets, demonstrating how far the
years since the OPEC+ coalition was formed in kingdom is willing to go to keep the OPEC+
late 2016. alliance together. Russia has exploited this to its
Oil trading was unsurprisingly bullish on advantage. Moscow can put pressure on Riyadh
February 1, when the Saudi cut came into force. to make concessions because the Russian econ-
Brent was up 1.64% at $55.94 per barrel, while omy is far less reliant on oil than the Saudi one.
West Texas Intermediate (WTI) increased Saudi Arabia’s fiscal breakeven oil price is typi-
1.6% to $53.02. Norwegian consultancy Rystad cally around twice as high as Russia’s, meaning
Energy also pointed to declining US inventories the latter is more comfortable with low prices. ™

Week 05 03•February•2021 www. NEWSBASE .com P9