Oil manufacturers think about extending a transaction to reduce…

Oil manufacturers think about extending a transaction to reduce…

M&A: Dealing with Uncertainty

Oil manufacturers think about the extension of the transaction to reduce the prevention of the prevention virus is measured in the barrels

The spread of a new type of coronavirus in China, the largest importinger of oil in the world, and related concerns about the reduction of demand for raw materials caused a discussion about the future OPEC transaction+. Experts believe that the influence of this factor on the market is still worth assessing, but it will not be the main reason for the possible extension of the transaction or change its parameters. The current drop in oil prices is largely caused by other factors – warm winter and the weakening of geopolitical tensions around Iran.

Against the background of the spread of coronavirus, OPEC discusses the extension of the term of the transaction about the restriction of oil production, which is still valid until April 2020. The last time the deal was held in December 2019, the reduction is 0.5 million barrels per day (b / c) from October 2018. According to the interlocutors Reuters in OPEC, the cartel is considering the extension of the transaction at least until June 2020 or even before the end of the year, while the option “increases reduction in production, if the spread of a new coronavirus will significantly affect the demand for oil in China”. The agency’s interlocutor clarified that the tightening of the transaction is only “probability”, the effect of the virus in the demand is still indefinite. Russian oil companies last year advocated the mitigation of the terms of the transaction. In Russian Ministry of Energy did not provide comments.

What is aware of the new coronavirus

Despite these informal statements by the participants of the cartel, its leader – Saudi Arabia – is trying to reduce the concerns of the market participants about a possible decrease in the demand from China. So, this week Minister of Energy of the country Abdel Aziz Ben Salman said that OPEC countries have opportunities to respond to any changes in the market.

China – the largest importer and the second largest consumer of oil in the world. In 2019, according to the Chief Customs Department of the country, the PRC imported 10.12 million barrels per day. The measures taken by the authorities of China to prevent the proliferation of coronavirus – a ban on departure from the city of Wuhan and restricting movements in the entire province of Hubei, as well as the abolition of measures to celebrate the Chinese New Year throughout the country – can lead to a reduction in fuel consumption. Against this background, oil prices sharply fell below this week below $ 60 per barrel Brent. According to Saudi Minister, a significant part of the impact on world markets, including oil markets and commodity markets, due to psychological factors, although the impact of a new virus on global oil demand, in his opinion, is very limited. Abdel Aziz Ben Salman also reminded that such pessimism was in 2003 during the crisis caused by the spread of an atypical pneumonia virus, but did not lead to a significant decrease in oil demand.

Despite these informal statements by the participants of the cartel, its leader – Saudi Arabia – is trying to reduce the concerns of the market participants about a possible decrease in the demand from China. So, this week Minister of Energy of the country Abdel Aziz Ben Salman said that OPEC countries have opportunities to respond to any changes in the market.

Oil manufacturers think about extending a transaction to reduce ..

China – the largest importer and the second largest consumer of oil in the world. In 2019, according to the Chief Customs Department of the country, the PRC imported 10.12 million barrels per day. The measures taken by the authorities of China to prevent the proliferation of coronavirus – a ban on departure from the city of Wuhan and restricting movements in the entire province of Hubei, as well as the abolition of measures to celebrate the Chinese New Year throughout the country – can lead to a reduction in fuel consumption. Against this background, oil prices sharply fell below this week below $ 60 per barrel Brent. According to Saudi Minister, a significant part of the impact on world markets, including oil markets and commodity markets, due to psychological factors, although the impact of a new virus on global oil demand, in his opinion, is very limited. Abdel Aziz Ben Salman also reminded that such pessimism was in 2003 during the crisis caused by the spread of an atypical pneumonia virus, but did not lead to a significant decrease in oil demand.

Sberbank Sberbank, Mikhail Shebe, believes that the decisive efforts of the Chinese government to control the proliferation of coronavirus in Uhana will have a significant impact on the economic activity and demand for oil in the PRC, but there are significant uncertainty about the scale and duration of any economic slowdown. According to expert estimates, the demand for aircroerosyn and gasoline in China at the end of the first quarter is likely to decrease by 5% (50 thousand. barrels per day) and 2% (80 thousand. Barrels per day), respectively, compared to the first quarter of 2019. In his opinion, the situation with Coronavirus can become essential, although not the key, argument in favor of prolongation of the OPEC transaction+.

How coronavirus affects Russian business

According to Anton Usov from KPMG, in the medium term, the situation with Coronavirus will not affect the terms of the OPEC + transaction, or in demand for oil. At the same time, in perspective of several months, if the virus spread will continue, it can lead to a decrease in passenger traffic and provide a short-term effect on demand. According to the expert, the main factors affecting the current fluctuation of prices for oil are warm winter and stabilization of the geopolitical situation around Iran.

Oil manufacturers think about extending a transaction to reduce ..
Oil manufacturers think about extending a transaction to reduce ..

Similar Articles