The price of oil rose to almost $75 per barrel due to Iran’s missile attack on Israel. But it may return to its previous position around $71. Due to such a low price, OPEC+ countries postponed increasing production for two months. At the same time, Saudi Arabia threatened its partners with collapsing oil prices by opening the valve if they do not respect the quotas. Some countries do not meet their obligations, which also affects global commodity prices. For Russia, such a move by Riyadh does not bode well, experts believe.
If OPEC+ countries fail to meet their oil production obligations, the price of oil could fall to $50 per barrel. According to The Wall Street Journal, such a warning to partners was made by Saudi Arabia’s Energy Minister, the Prince. Abdul Aziz bin Salman.
The publication’s interlocutor said that the participants in the teleconference interpreted the prince’s words as a threat to start a price war by sharply increasing oil supplies from Saudi Arabia.
On the other hand, Abdulaziz bin Salman focused on Iraq and Kazakhstan, which do not meet their quotas and do not compensate for overproduction, a source told The Wall Street Journal.
In September, oil prices fell to around $71 per barrel, the lowest level since November 2021. On the one hand, the market does not expect a large increase in demand from the largest US consumers. and China. On the other hand, even the decision of OPEC+ to postpone the start of the increase in production until December did not play a special role, since the members of the agreement themselves violate the quotas and supply more oil to the market.
The International Energy Agency estimated that surplus volumes, for example, in May amounted to 630 thousand barrels per day, 16% of all announced reductions. The United Arab Emirates was named the biggest offender. Its production was 3.25 million barrels per day, 340 thousand barrels more. Iraq followed: 280,000 more barrels. Furthermore, quotas were not fully met in Saudi Arabia and Russia. According to the IEA, 50 thousand barrels per day and 170 thousand barrels per day, respectively. All participants promised to compensate for overproduction, but not all do so.
Leading analyst at FNEB and expert at the Russian Government Financial University Igor Yushkov points out that there are discipline problems in OPEC+ and Saudi Arabia constantly struggles with them. The expert gave the example of Russia, where the government cannot influence companies and everything follows the path of a gentlemen’s agreement.
“If OPEC+ collapses, then everyone will produce at maximum and there will be excess supply. As a result, all countries will suffer, since at this time the price of oil may fall below $50 per barrel.” – noted Igor Yushkov.
Rystad Energy estimates that onshore fields in the Middle East are the most attractive in terms of cost. The average equilibrium price for new projects is $27 per barrel. Offshore fields were valued at $37 per barrel, deepwater fields at $43 and North American shale at $45. Rosstat estimated the cost of oil production in the country in 2023 at approximately 23.6 thousand rubles per ton ($30 per barrel), without taxes.
A prominent FNEB analyst notes that Saudi Arabia’s implementation of the threat will be an unpleasant surprise for the Russian government.
“Our budget for 2025 includes a price of approximately $69. At the same time, there is a discount on the Russian Ural variety, which is indicated in the budget, which today is about 8-10 dollars. Therefore, if world prices fall to $50, then our oil will cost about $40. If we do not receive enough funds from oil exports, we will have to increase the national debt, accelerate the spending of the National Welfare Fund and ultimately reduce budget expenditures. , including social and defense ones”, – added Igor Yushkov.
