Oil: Russia and Saudi Arabia agreed to reduce quotas

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Russia and Saudi Arabia agreed to reduce quotas. The exact figure is unknown, however, if the decrease will be really 1.3 million barrels per day, the excess supply is likely to leave the market. Qatar has notified OPEC of withdrawal from the organization. However, its weight in the extraction of raw materials is small and the news is already priced in by the market.
It is worth noting two important points. First, cooperation between Russia and Saudi Arabia would hardly have been possible without the military successes of Russia in Syria. After the Soviet collapse Moscow in the middle East ceased to be taken seriously. And, of course, the second thing you need to remember is that the Saudis are more sensitive to oil prices.
Russia’s budget deficit at $53 per barrel, and Saudi Arabia, this figure is expected to be $88. The question remains with the prospects, the IPO of the oil company Arab Kingdom Saudi Aramco. Russia its oil assets to privatize will not be the share in the capital “Rosneft” and “Gazprom” now reduced to the lowest possible control.
So how much will oil cost before the end of the year? If the information in the media is correct and the excess supply will leave the market, we can focus on the corridor of $60-70 per barrel. However, we remain fundamental “bears”. The rising cost of money and the collapse of the U.S. stock market will do the job. We are not very surprised by the $30-$35 per barrel next year.
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Alexander Razuvayev,
The Director of analytical Department,
Alpari