Oil & Gas 2020

In fact, there is no doubt that the spring systemic crisis in global oil production, which has been completely extinguished in an absolutely amazing way, will drag on the event not even years, but decades.

And according to its genesis.

And according to the dashing scenario of a catastrophe and rescue of oil markets.

And in its own simple even purely systemic consequences.

Apparently, in the end, it is quite capable of leading the world to such a global reformatting of the oil and gas markets, which are indirectly connected with them, which the world economy cannot yet really comprehend and realize.

However, let's go in order.

The global crisis in big oil, which is now accepted retroactively to correlate with the COVID-19 pandemic, is associated with it, if only indirectly.

At first, COVID-19 was not even one of the factors - only perhaps a crisis trigger.

It was only later that a lockdown, a halt (full or partial) of most world economies, was superimposed on its already not the most simple course.

Initially, it was a classic crisis of overproduction, which was described many times in textbooks, at the peak of which there was also an exchange, superstructure crisis in speculative markets: the price of a futures, as many, I am sure, remember, very nicely broke through the bottom of purely negative values.

And the consequences of this story could turn out to be quite disastrous and without any pandemic.

Although, of course, COVID-19 helped what is happening to sparkle with new, bright colors - here, of course, not without that.

At the same time, we must pay tribute: it was the malicious virus itself that ultimately helped to quickly develop a mechanism for overcoming the systemic crisis.

And its most harmful consequences fell on the industry even when the anti-crisis mechanism started working, which was immediately called the OPEC ++ cartel by the ubiquitous journalists.

Although, as it turned out later, unfortunately, both the mechanism and the formal OPEC ++ agreement did not really succeed.

And now it is unlikely to succeed - and the economy has absolutely nothing to do with it.

It's just that Democrats and globalists suddenly won in the last US elections.

But the failed OPEC ++ certainly played its (almost decisive) role in the joint development of the anti-crisis scenario.

And the scenario for rescuing global oil production by the high contracting parties was not just decisive, but, one might say, decisively radical.

At least, the world production until 2020 was absolutely not aware of such a comprehensive, tough and effective regulation.

Against the background of a sharp drop in oil prices in the spring of 2020, the OPEC + countries agreed on a record-breaking 9.7 million barrels per day reduction in oil production.

By the fall, the reduction should have been fixed already at the level of 7.7 million barrels per day, and this was also executed, although the parties agreed in advance on the possibility of correction.

But the calculations and forecasts turned out to be quite accurate, and no adjustment was required.

But since January 2021, it was planned to reduce production by 5.8 million barrels per day, but due to the second wave of the pandemic, these preliminary agreements had to be revised.

However, more on that later.

In the meantime, we add that in the spring the United States and some other countries that did not participate in either OPEC or OPEC + - oil producers did not just join the global deal - it was the United States that acted as its real initiator.

Moreover.

You need to be fair to the outgoing nature: the outgoing American President Donald Trump was the real architect, initiator, director and even in some way the guarantor of the deal.

And here you don't even need to invent anything: a series of his calls to the first persons of Russia and Saudi Arabia was almost demonstratively public, despite the entire negative image of Russian President Putin in the United States of America.

That on the eve of the election campaign was at least pretty bold.

And this is by no means surprising, because the spring deal (yes, with undoubted observance of the interests of both Russia and Saudi Arabia) was directed and carried out primarily in the interests of the United States.

The oil industry of which at that time was already in fact in a completely desperate situation.

And both the Russians and the Saudis simply could not help but understand this.

The reason for this is extremely simple: it was the American oil industry that was the most dynamically developing before the crisis (America even for some time came out on top in production in the world, which Trump, I remember, was terribly proud of).

But at the same time, the most expensive in terms of production costs and, accordingly, the most vulnerable in comparison with competitors.

And the crisis of overproduction, provoked by the Americans, hit them first of all.

To be surprised at this would be at least rather strange: the classical, fundamental laws of economics cannot be canceled by any fund mechanisms.

On the contrary, something like that sooner or later is just purely mathematical and was to be expected.

Nevertheless - we can only guess at what cost and in what ways (threats, concessions and blackmail) - the big oil deal was nevertheless concluded.

Everyone lost in it - otherwise it was simply impossible during the crisis.

And it was the United States of America that undoubtedly lost the most.

But the American oil industry received a kind of quotas and (with the inevitable rise in prices) very serious chances of survival.

After that, the world started talking not only about a big deal, but also about a new big oil troika represented by the Kingdom of Saudi Arabia (representing the interests of OPEC), the Russian Federation and the United States.

No, everything there was certainly far from cloudless, especially in the gas markets closely tied to the oil industry, but not formally included in the deal.

It is enough to recall the "dirty dances" of the USA, which are absolutely indecent in their epic character, around the Russian-European pipeline Nord Stream 2.

Especially, by the way, those who look cynical just because the American problems in oil production are absolutely mirrored to the problems in gas production.

They are closely intertwined purely technologically and financially.

And America will simply not be able to supply any LNG instead of Russian pipeline gas to Europe in the next ten years at least (the construction of new liquefied gas facilities on the East Coast has already been frozen in fact).

But in general, in the oil markets proper, the parties behaved in a markedly conventional manner, and this deal could be safely attributed to events, as we wrote above, perhaps not even a year, but at least decades.

Thanks to her (at least in fact), the markets have acquired new manageability.

The corridor of oil price volatility became clear, and even stock speculators began to detach paper oil from reality a little less.

In general, there were signs of stability, recovery and even a gradual recovery began.

Which was slightly corrected, but not even stopped by the second wave of the pandemic.

The situation changed where it was not something that was not expected at all - no, as it is now becoming clear, in the Russian Federation and Saudi Arabia they were just waiting - but they were somewhat unprepared.

In the United States of America, elections were held in which the initiator of the big deal, Donald Trump (for whatever reason, in this case) lost quite ingloriously.

And the Democrats who came to power together with Biden traditionally have slightly different priorities.

In short: globalization, climate and, accordingly, green energy.

And neither the reindustrialization of the United States, let alone the salvation of the American oil industry, are by no means included among these priorities.

No, of course, no one (despite the old enmity - even from the time before the first Kennedy) will deliberately destroy the oil industry in the United States.

But, unfortunately, there is no need to ruin it: without serious help, including refinancing, even with the current price corridor, which is quite loyal to the mining structures (the Russian profile vice-premier Novak just recently outlined a corridor of $ 45- 55, it seems that it suits our Saudi partners as well), at least from the standpoint of a global player, it will cut itself out.

And pretty soon: it is no coincidence that at the beginning of December OPEC + (primarily the Russian Federation and the Kingdom of Saudi Arabia, of course) agreed to increase production by 500 thousand barrels per day starting from January 2021 - without any regard for partners from the United States.

And if this happens in the nearest historical reality (and there are no other prerequisites), it will also be the end of the great American shale revolution.

The gradually dwindling production of which, at best for her, will go to the domestic American markets.

And even then it is not a fact: in America, thank God, there is also traditional mining and it will cover oil shale mining in the domestic markets, like a bull, excuse me, a sheep.

And although this process, of course, will not be one-step, most likely, it is already irreversible.

And global changes, not only geo-economic, but also geopolitical, in the very near future may cause such that the spring big OPEC ++ deal will seem, as some Ostap Bender used to say, a child's rat game.

However, the forecast even for the nearest historical perspective is a rather insidious thing.

And at least a topic for a separate article.

The author's point of view may not coincide with the position of the editorial board.