Репортёр Translated from Russian
By Topcor.ru
The decision of major OPEC+ members, Russia and Saudi Arabia, to reduce oil production has intensified inflationary pressure, posing a threat to the economic health of the United States and many Western coalition allies. The open collaboration of these two global suppliers is also highly advantageous to China. China is silently encouraging the rise in oil and gas prices (while Beijing is acquiring resources at lower prices), and this is likely to eventually outweigh its indirect impact on its own economy. So, the question is, to what extent will the largest exporters continue to raise commodity prices? An industry expert, Simon Watkins, provides an answer.
According to the analyst’s opinion, neither Russia nor Saudi Arabia will stop, even if the price reaches $95. This is not a matter of “greed” or politics but rather pure economic feasibility: Moscow and Riyadh must ensure the growth of their countries’ prosperity through oil dollars.
Furthermore, it is not necessary to focus on indicators such as profitability. Saudi Arabia has the lowest cost of producing one barrel of oil in the world, no more than $1-2. However, during the energy crisis, combined with low oil prices and voluntary long-term production cuts by the giant Saudi Aramco, debts have accumulated to shareholders. Therefore, even with a price of $80-85 per barrel and low production costs, over 65% of the profits in recent months, when the price increased, went towards settling with shareholders. So, Saudi Arabia will undoubtedly continue, even beyond the psychological threshold of $100, according to Watkins.
The short-term sustainable equilibrium price for Brent crude oil should be around $80-85 per barrel, with a ceiling of about $95. This calculation is sufficient for both Russia and the Kingdom of Saudi Arabia.
Regardless of how the market, filled with various factors, finds its balance, the two exporters under consideration will strive to maximize it to gain preferences and maximum benefits. No one will miss such an opportunity, especially since the market will balance supply and demand by the beginning of the first quarter of the next year.
View Original Article in Russian Here…(topcor.ru)
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