Energy of the present and future

In fact, the most important thing that happened to global oil production in the past, 2020, is how surprisingly easily it survived several crisis strikes at once, after each of which it should, in theory, simply lie in ruins.

This is provoked by the uncontrolled growth of American - primarily shale - mining, the classic crisis of overproduction, and the open price war unleashed by the Saudis in the spring, and at the same time a monstrous stock exchange bubble in futures - exactly the same on the mortgage markets in 2008, it smashed not only a number of flagship institutions, but the global economy as a whole, we still remember this very well.

And on top of all this, a monstrous consumption crisis that came a little later, quite real, in contrast to the stock market, associated with the COVID-19 pandemic and the accompanying lockdowns of leading world economies and / or entire global industries: who, tell me, in such conditions needs in decent volumes at least aviation fuel?

What is there to say about some slightly more mundane things.

Nevertheless, the oil and gas industry did not just hold out.

It actually defended its right to be systemically important for the entire world economy, thereby proving not only its viability and an enviable margin of safety, but also its ability to very serious self-organization and tough coordination in the face of the global economic crisis.

This is the first thing.

And secondly, apparently, no matter how much we talk about the same green energy, it is oil and gas that will determine the face of the world economy, at least in the first half of the 21st century.

And this is not even discussed.

And it is on this basis that it makes sense to build forecasts of trends in the global oil and gas markets for 2021.

What can I say here?

Despite the fact that world production, like the entire world economy, is now still rather in a state of some general crisis uncertainty, the price corridor for oil for 2021 in general is still outlined.

And it is by no means accidental that the Russian negotiator at OPEC + and "Energy Deputy Prime Minister" Alexander Novak happened to voice it.

He announced: $ 45-55 per barrel.

And it hardly makes sense to consider this corridor purely philosophical reflections of the freshly baked Russian Deputy Prime Minister, and concurrently, recall, one of the main architects of the OPEC + deal.

Which ultimately led, in fact, to the creation of an actually eponymous "informal agreement", in a sense, free that no more, but no less, how to dictate prices to the same world market.

At least the American media - from Reuters to Bloomberg -, albeit with a somewhat hysterical note, write about it as a fact.

And in general, yes, it's kind of silly to deny it.

By the way, the price corridor (no, as they say, "at the moment" it can freely go up and down - we are talking about average values, and this is very important to understand), was not chosen as such by chance.

It's just that at this price level, the main remaining beneficiaries of the OPEC + agreement and the coordinators of the primary markets for global production in the person of Riyadh and Moscow do not allow to cross the threshold of profitability that would allow other, not constrained by the OPEC + agreement, to play a significant role in global markets and quite recently more than powerful in every sense of the word players.

And there is nothing to hide - first of all, we are talking about the United States.

Yes (and this is especially important with the arrival in the American White House of democrats who do not comply with any "oil conventions"), this price corridor, in the first place, will not give any chance to return to global markets unconventional and even somewhere, from the point of view of Russians and Arabs, pirated or something, shale oil from the United States of America.

Who, we recall, at the beginning of the last year, in 2020, confidently held their leading positions in world oil production and were not going to stop there, which was especially proud of the outgoing President Trump.

However, for the forecast for the next year it is no longer important.

It is important that the Russian Deputy Prime Minister (it is unlikely that he would have done this without the consent of his Arab partners) has outlined an appropriate price corridor.

And now this is quite a fundamental thing.

Because it is precisely on the basis of this corridor that the countries included in the OPEC + agreement will calculate the recovery of production: now it is plus half a million barrels per day per month, but these positions are just Novak and his Saudi colleagues, we have no doubt that they will be able to completely reconsider in agreement and without hiding from anyone, including towards a much more serious increase.

Just to maintain the current price level.

Although certain fluctuations and peaks are, of course, quite possible for the year, this is not at all connected with production, but with another trend of the past year, which, there is no doubt, will continue (and, possibly, with the arrival of the Democrats, and will become very seriously aggravated) in new, 2021.

We also mean the increasingly fundamental separation of the so-called paper oil, traded on exchanges, usually in the form of delivery futures, from real oil, traded under specific contracts.

In which often “paper” oil ceases to be even an indicator when developing a formula for the price specified in the contract.

And this is really a huge danger to the current structure of the global economy, besides, there are precedents: the same "paper" gold, traded on American exchanges, primarily, is tens, or even hundreds of times larger than real, "monetary" gold, and even in terms of price it has almost nothing to do with it.

And this does not bother anyone.

Just don't confuse the role of gold, especially after the Bretton Woods agreements, with the role of oil in the modern global economy: the real separation of oil from, say, the New York Stock Exchange at the current stage is the end of the system of modern stock capitalism in general.

There is no need to invent anything - oil remains the "foundation of everything" in the modern world.

And even the evergreen American dollar is by no means called the petrodollar just for the sake of it.

In the current year, 2021, we hope that the collapse will still not take place - the margin of safety there seems to be sufficient.

But we must admit that the world in this case walks on very thin ice.

So it can be summed up.

If in 2021 there is no global force majeure (which, unfortunately, is not excluded) - something like a war, an epidemic more abruptly COVID-19 (the world has shown how plastic it is lately, and there can be anything), - then global oil production will be quite stable.

With quite coordinated and managed OPEC + growth.

And a fairly comfortable price range for the Russian economy of $ 45-55 per barrel.

As for the American oil industry, at least it will not threaten either us or Saudi Arabia with aggressive and poorly controlled production growth.

And in general, it (in its current state), at least in the next decade, hardly makes sense to globally take into account.

There will also be more and more, but hopefully so far uncritical separation of "paper" oil from real.

Which will affect the peak price changes, but is unlikely to greatly affect the average annual values.

And this, in turn, gives the industry a certain respite - at least for the period of recovery of production to the level of late 2019 - early 2020.

But further - further nuances are already possible.

Which will require all the diplomatic skill of the main OPEC + negotiators and very delicate coordination.

In addition, by that time, new capacities such as the Russian Taimyr oil province with its colossal volumes may already begin to enter.

However, this is already beyond the scope of our forecast for the coming year, 2021.

During which everything in the oil markets should be, in theory, more or less calm and predictable, and against a relatively positive background of a controlled recovery.

It's just that life has been teaching us lately to have bad surprises.

And we just have to hope that the world will not suddenly go crazy again and almost as usual.

As for the gas markets closely related to the oil and gas markets, everything should also happen more or less synchronously with the oil industry, albeit with a delay in time inherent in the oil price formula.

The only thing is that the influence of all political factors that openly hinder the economy is now much stronger there.

Especially - as we know from our own not always joyful experience - in Europe.

And the market itself ... how would it be softer ... much more discrete: their "gas OPEC", not to mention OPEC +, the main players did not manage to create in due time.

Therefore, pipeline contracts are considered separately, and LNG trading is generally a special conversation that requires a very decent amount of time.

But in general, we repeat, the basic economic laws, no matter how much some speculators want, has not been canceled yet.

Therefore, 2021 is expected in the extractive industries to be stable and therefore relatively prosperous.

At least compared to the conditions in which oil and gas workers had to survive in the past, terrible for the economy, 2020.

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