The IEA has predicted that there will be a global oil shortage in the fourth quarter of this year. The organization explained its assessment as the OPEC + alliance produces 900 thousand barrels per day less than the oil demand.
“Increasing oil reserve consumption in the third and fourth quarters of 2023 could put downward pressure on profitability and refining activities, leading to significant shortages of petroleum products, especially in the last quarter of the year,” the IEA emphasized.
In November, Russian Deputy Prime Minister Alexander Novak announced that Moscow would continue an additional voluntary cut of 300 thousand barrels per day in the supply of oil and petroleum products to world markets until the end of 2023. In March, Russia began voluntarily reducing fuel production by 500 thousand barrels per day.
According to the IEA, Russia reduced its exports of oil and petroleum products by 70 thousand barrels per day to 7.5 million in October this year, while Moscow’s income from fuel supply abroad decreased by 25 million dollars (18.34 billion) due to the decrease in global oil prices. dollar) declined. Price:%s At the same time, Russia’s oil production in October amounted to 9.53 million barrels/day, compared to 9.5 million barrels/day in September.
According to the IEA, the impact of the drop in oil prices on supply profits was greater than the decrease in the discount of Russian Ural oil to Brent. At the same time, oil supplies were higher than in September, and oil products decreased, according to the report.
What will the deficiency lead to?
Andrei Loboda, BitRiver’s economist and communications director, said a global oil shortage is possible in the fourth quarter. The expert explained that the world’s fuel demand exceeds its supply.
“Demand is increasing, especially from India and China. Countries are increasing fuel consumption following the coronavirus pandemic. Not investing in new projects to extract raw materials also causes demand to increase further.
Despite U.S. oil production efforts, shortages are already slowly emerging. “The aim of Russia and Saudi Arabia’s actions to reduce oil supply is to keep fuel prices in the Brent range of 85-95 dollars per barrel.” – added Igor Yushkov, leading analyst of the National Energy Security Fund.
He explained that neither Moscow nor Riyadh needed excessively high oil prices. The cost of raw materials above $85-95 will result in a decrease in demand from end consumers, businesses and countries in general.
“Until the end of the year, Saudi Arabia and the Russian Federation will continue to reduce oil production, while production in other OPEC countries seems to continue to fall behind the plan. This means that supply will not have time to grow enough to fully satisfy the growing demand in China,” Loboda added.
In this background He suggested that the barrel price of Brent oil could go up to 90-95 dollars.
“The open state of the oil market may encourage a rise in prices; We do not rule out that Brent quotes will reach $90+ levels by the end of the year. The market’s focus remains on the situation in the Middle East; The hotter the situation there, the higher the “war premium” will be. Alexander Bakhtin, investment strategist at BCS World of Investments, stated that the degree of tension has decreased recently and this is reflected in prices, but the echoing conflict is not over yet and can unsettle the markets more than once.
Further increases in interest rates by the US Federal Reserve could prevent oil prices from rising in the foreseeable future. (The probability of a new increase in December is currently estimated at 14%)In addition, Bakhtin believes that the worsening dynamics of macroeconomic indicators in China and the increasing sanctions pressure on Russia’s raw material exports.
What does this mean for Russia?
According to Yushkov, Russia benefits from the $80-90 Brent barrel range. Oil prices have been rising since the summer; The cost of a barrel of Brent rose from $76 to $90, but recently fell to plus or minus $80. It is trading at $83.06 as of 17:00 Moscow time.
“Saudi Arabia determines its budget on the basis of 85-86 dollars. The USA is also satisfied with this standard. The global economy will recover in 2024. This will mean that energy consumption will increase, so oil prices will also be high. “But Russia and Saudi Arabia will begin to bring additional amounts of fuel to the market if oil prices are extremely high ($100 per barrel in Brent),” he said.
Yushkov explained that expensive oil is important for the Russian budget.
“Oil workers pay mining taxes to the treasury as well as export taxes on materials abroad. They are calculated every month.
When oil prices rise, budget revenues increase. And when it is renewed, household income increases and people begin to consume more. Additionally, the state can allocate additional money to the social sphere,” the analyst concluded.
Loboda added that if there is revenue in the budget, there will also be funds in the National Welfare Fund, which is Russia’s main “pot” and which the state uses to implement large national projects when there is not enough money in the treasury. He concluded that with a very high probability the budget deficit will not exceed the planned limit of 2.9 trillion rubles by the end of 2023, which will be a plus for the economy and the population in general.