“They are afraid that Russia may withdraw from the OPEC + agreement altogether. We are balancing on the edge here"

Marcel Salikhov, President and Head of the Economic Department of the Institute for Energy and Finance, commented on the OPEC + decision to increase oil production in Russia to the Internet portal "BUSINESS Online".

Marcel Salikhov - Researcher at the Center for Comprehensive European and International Studies, President and Head of the Economic Department at the Institute for Energy and Finance:

- It seems to me that, on the whole, the OPEC + decision is quite unexpected, because if we look at what has happened in the oil market over the past few months, we will see that the situation is quite favorable. The world economy is recovering, world trade is growing, prices for container transportation are now at a record high, and they are generating demand for heating oil. The evidence that the market is in deficit is declining oil reserves. Any data show that the excess oil reserves that have been accumulated over the past year are consistently declining. That is, the current demand exceeds the current supply. All this led to a rise in prices. Back in early November last year, prices were about $ 40 per barrel, now, 4 months later, they are $ 65–67 per barrel.

According to the original plan, which was discussed a year ago, the countries were supposed to start increasing oil production from January 1 of this year. In January, they decided: "Ok, pandemic, nothing is clear, let's wait." Two more months pass, there are again the same conversations, again a pandemic. In my opinion, this is such a postponement of the inevitable, when you throw the inevitable decision further. At the same time, the position of Russia was in the need to increase production and return to the market, therefore such an exception was made for the Russian Federation and Kazakhstan. 

In the future, in my opinion, such a postponement will lead to the fact that in the long term, the higher the prices, the more the same shale production in the United States has more opportunities to restore its positions. Oil will now grow to $ 70 per barrel - and most of the American producers will fix for themselves this price level for the next year. That is, it does not matter what will happen to prices in the future, their price will always remain high. On the one hand, it's great that you keep raising and raising prices. On the other hand, all those manufacturers with whom you compete and which you do not like will also return to the market. This whole situation creates a kind of "swing", the prerequisites for a collapse in prices in the future. In my opinion, it would be much better to target this level within the range of $ 50-60 per barrel. If prices are higher, you need to increase production in order for prices to decrease. If the price falls, cut production until recovery. And sitting and doing nothing is not a very productive strategy, in my opinion, from the point of view of OPEC + experts.

In general, the rise in oil prices is positive for the ruble. But due to the operation of the budget rule and sanctions histories, this connection is not particularly pronounced in the short term. It is enough to look at the last months: prices have risen, and the ruble exchange rate has not reacted to this. But if we look at the quarter, for the year, then the rise in prices significantly affects the ruble: the higher the price of oil, the more foreign exchange comes to the Russian foreign exchange market for the same volume of exported oil. Part of the currency is withdrawn by the Ministry of Finance within the framework of the budget rule, but it does not burn them, but stores them. This is good for the long-term stability of the ruble exchange rate, because it affects the gold and foreign exchange reserves of the Bank of Russia. They are growing, and the prerequisites are being created for the strengthening and stability of the ruble exchange rate. The Russian ruble is a commodity currency.