Page 82 - RusRPTMar20

All Russian oil producers aside from Rosneft reportedly support extending the OPEC+ production cuts into Q2.​ As a reminder, the alliance of oil producers agreed in December to deepen production cuts in the first quarter of 2020 to 1.7 million barrels per day compared to October 2018 production levels. A decision on whether to extend these cuts into the second quarter will be made at the next OPEC+ meeting in early March.
If Russia's share of the production cut remains the same ​(currently 298kbbl/d out of 1,700kbbl/d), an additional OPEC+ production decrease would result in the Russian target production level declining 88kbbl/d. This might have a dampening effect on Russian oil companies, with Tatneft potentially suffering the most due to its limited ability to shift production to higher-margin barrels.
At the end of 2019, the OPEC + countries extended and tightened the deal to limit production: the parties pledged to reduce production by 1.7mn barrels per day ​to the level of October 2018 compared with the previous 1.2mn. But last week, the OPEC + technical committee recommended reduce production in the second quarter by another 600 thousand barrels per day, taking into account the fall in demand in China due to the virus, extending the agreement until the end of the year.
OPEC on February 12 lowered its forecast for oil demand growth in 2020 by almost 20% - from 1.22mn barrels per day to 990,000​. Almost the entire decline will come from the largest importer in the world - China, the organization said.
On the same day, WHO reported the stabilization of new infections in China over the past week ​(which would mean that the spread of the COVID-19 virus is supposedly under control), but almost immediately after that, the authorities in Hubei Province counted an additional 15,000 cases using a revised method , and the number of deaths per day reached a record 242 people since the beginning of the epidemic.
Since January 20, when news of the coronavirus has become alarming, Brent has fallen in price by 15% - from $65 to $55. ​Since early February, the price has fluctuated around this level. WSJ notes that such a sharp drop was due to the actions of banks in, which traders hedged oil contracts
Gas prices in Europe have fallen to $101.70/kcm – a 15 year low. ​Gas prices in Zeebrugge reached $95.70/kcm on February 7, which is a 15 year low last seen in 2005. “We note that spot gas prices in Europe have been below $100/kcm in February, which is unusually low for the winter. The last time such price levels were observed was in September 2019. Given the spot price level in Europe, domestic deliveries are currently more valuable for Russian gas producers than exports to Europe, we estimate,” VTB Capital (VTBC) said in a note. “While both Gazprom and Novatek’s Yamal LNG export a sizable portion of gas on long-term oil-linked contracts (for Gazprom, the share of oil-linked and hybrid contracts stands at around 40%, we believe), the low level of spot European gas prices might present risks to our financial forecasts for Russian gas companies,” VTBC concluded. Gas prices have been depressed by a combination of an unseasonably warm winter and the high level of stored gas in anticipation of a gas war that didnt happen.
Chinese CNOOC, as well as potentially Sinopec and CNPC, might cut
82​ RUSSIA Country Report​ March 2020 ​ ​www.intellinews.com