Oil: In the next three years the market will change dramatically due to shale extraction

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Disastrous for the whole world (except Russia) 2017 in the field of exploration and production of hydrocarbons in new fields led to a reassessment of the indicators of the entire oil industry for the next three years. Recovering after the agreement of OPEC countries, oil production in Russia may go into decline after 2020, if the Russian company will not be able to provide technology development and funding for new projects, and the government would encourage investment through the tax regime, as in other countries, warns the International energy Agency. According to the forecast Agency, oil production in Russia will recover after a decline in 2019-2020, and then reaches a peak in early 2020-ies, after may again begin to decline.
You can see that Russia has benefited from the fact that the base level for production cuts within OPEC Pact+ was taken October 2016, when production was at a record level. Oil and condensate production in Russia in 2017 was higher than in 2016, while the oil is about 20% more expensive, the report said. At the same time, the United States will occupy a dominant place in the market of production of oil and condensate, overtaking Saudi Arabia and Russia and become the new “oil appendage” of the world.
Crude oil production in the U.S. by 2023 will rise by 2.7 million barrels per day to 12.1 million barrels per day, while oil production in Russia is now about 11 million barrels per day. Total world production of oil and condensate is likely to grow by 2023 to 6.4 million barrels per day, of which the United States will have a 3.7. Further growth of oil production in the United States can spur possible introduction of the USA tax on imports of “black gold”, lobbied at the moment by a number of congressional Republicans. If such a tax is introduced, it will grow proportionally and the cost of imported U.S. oil.
In this case, the us refineries are willing to pay more for American oil that prostimulirujte the growth of its production in the United States. This maneuver allows to minimize the costs of protectionism in the steel industry, because the cost of production will not be profitable if the barrel will cost less than $ 65, while its own production will cover up to a quarter of the required volumes. If taxes are introduced, the oil will rise in price for them, and if not, then it will grow from-for absence in the market of cheap steel and the high cost of production. US still undecided which version is better, but both lead to complications in global markets and the redistribution of shares in the sectors in the next three years.
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Alexander Grigorenko,
Asset Manager
IR Global Capital