The Saudis and Russian base oil Alliance desperate

No matter what it takes. His promise in 2012 to do all needed chief of the ECB Mario Draghi (Mario Draghi) has saved the Euro. A joint currency exists today, and its use even in two of the country more than five years ago. A fiery speech Draghi found imitators in the oil market. Two important players, Russia and Saudi Arabia, promised, whatever the cost, to do everything to rescue oil prices. Both want to significantly expand the time existing from the beginning, the limitation of oil production to stabilize oil prices. Both countries are striving to extend to the end of the first quarter of 2018, the reduction in the production, originally designed for six months to June this year. Russian President Vladimir Putin personally presented this agreement.

New oil Alliance between Russia and the Saudis is quite remarkable. Combine the two, which are still a little sympathetic to each other. The Kremlin has collaborated so far in the Persian Gulf with Saudi arch-enemy Iran. However, a need brought former antagonists. Both need for domestic political reasons, in stable oil prices. Putin faces new elections in March next year. The collapse of quotations of energy would be extremely inappropriate. For their part, the Saudis want in 2018 to put the exchange part of the group Saudi Aramco. Low oil prices would reduce revenues and thereby would bring less money for the programme 2030 for a radical overhaul of the Saudi national economy, regardless of oil prices.

“The domestic interests of these States has brought together both the key players in the oil market,” says Sassan Ghahramani (Sassan Ghahramani), the strategic expert of the independent analytical center SGHMacro Advisors. “Both made it clear that they will do everything to once again raise oil prices to the level from 50 to 55 dollars.”

Reserves would be enough for 65 days

Production cuts should eliminate the global oversupply of oil. It is important so to reduce the sentence to have been reduced as well of the excess reserves. Only one storage the most important member States of the OECD there are about 3050 million barrels. These reserves would be enough at current consumption 65 days, ten more days of multi-year performance. “Oil producers aim to reduce reserves to the average of the past five years,” says Mike Wittner (Wittner Mike), an oil expert of the company Société Générale.

If the oil producers will adhere to these cuts, the excess inventory will be reduced before the end of March 2018. This is evidenced by the calculations of the financial Agency Bloomberg. The state oil cartel froze its daily production to present to 31.7 million barrels, and Russia still will not produce in excess of 11.15 million barrels per day.


However, many experts have expressed doubts whether these reductions are sufficient to re-stabilize quotes on a level above $ 50 per barrel. “To reduce the inventory to a five-year average level is not very ambitious,” says Carl Weinberg (Carl Weinberg), chief economist of the independent analytical center Highfrequency Economics. Over the past five years, oil prices have fallen, why the reduction of its reserves to the average level over the last five years should stabilize prices, he says. Weinberg believes that it is possible in the coming months rather quotes from 45 to 50 dollars.

Also Goldman Sachs does not consider new oil Alliance is particularly powerful. If we are talking about the overproduction of oil, the players have to watch not so much on the OPEC cartel, many on the American bond market. Background is the American production of shale oil, which easily financed with cheap loans and thus allows you to produce more oil. As long as investors are literally throwing money shale oil producers, OPEC can do whatever he wants. “OPEC has lost its power over prices”, — says, in any case, the analyst from Goldman.