Posted on 10/28/2022 7:05:39 PM PDT by BeauBo
Russia’s finance ministry has slashed its forecast for taxable oil production for next year, a draft budget seen by Reuters showed on Friday.
The draft budget covers the next three years and forecasts a decline in crude oil production and refining as Western sanctions bite...
The finance ministry sees Russian oil and gas condensate production... a 7% - 8% decline from... (what) the ministry anticipated this year (after having already adjusted this year's estimate downward)...
Expected oil refining volumes were cut by nearly 20%...
The refusal of some countries to work with Russia in the oil markets and having to discount Russia’s main exports triggered the revised forecast with regard to oil production.
The data release comes as U.S. and Western officials hash out their plan to cap the price of Russian oil. Russia has threatened to stop oil deliveries to any buyer engaging in price capping.
(Excerpt) Read more at oilprice.com ...
Russia's economy and Government finances are in crisis, because of Putin's war of choice.
The G-7 are united in trying to make it worse for aggressor Russia, economically and financially. The big push against Russian oil revenue is scheduled for December 5th (Price caps), but clearly sanctions have already sent Russian oil production into significant contraction.
They can not meet their now continually declining OPEC+ production quotas.
I tried to cap my property taxes. They told me to fook off.
“The data release comes as U.S. and Western officials hash out their plan to cap the price of Russian oil.”
I have told you guys repeatedly you know nothing of oil unless you put in the effort to download BP’s annual World Statistical Report, on the BP website. It is a huge spreadsheet.
Russian oil (all liquids, Crude and Condensate) production in 2019 was 11.1 million barrels/day.
That fell in 2020 to 10.2 million bpd, from Covid. That’s 8+% decline.
Price of crude in 2019 was about $55/barrel.
It is now nearly $90. Russian production is about 10.5 mbpd.
So we’re cheering a scale back of 7% in production, while the price is up 39%. And guess what, if production declines, as it likely will, in concert with the Saudi’s, then price is going up even more, unless you decide to shut down the economy just to keep the price lower.
At which point in time it is unlikely either of Russia or KSA are hurt particularly, given their debt to GDP is about 1/5th the US.
A lot has changed. Foreign partners, technology and financing pulled out much quicker than Venezuela. Did that hurt production there? That was without the Russian complications of difficult deposits in the Arctic, far from markets. Venezuela didn’t have to offer $30 discounts to sell or smuggle its oil.
But, that huge spreadsheet leaves out some important information, aside from the question of whether any data provided by Russia can be believed anyway.
First off, comparison to $55 / barrel oil is misleading: $55/ barrel oil cannot support Russia's gov't sufficiently, even in peacetime, without vastly greater production. Like SA, what they best need is more like $90 oil with good production levels, such as (for Russia) ~11 million barrels / day.
Russia is having to discount 30%.
Most (not all) Russian oil is more difficult to refine than, say, most ME oil. This and ongoing transport issues (not including the new EU secondary sanctions on transport soon to go into effect) typically puts Russian oil at a $5-$7 disadvantage to ME oil.
The coming recession is being primarily driven by inflation and supply chain disruptions and shortages. Plus considerable weakness in the Chinese economy. This in aggregate is not something the US has seen in a significant way for at least 30 years, although it is not uncommon outside of "The West".
So... unless you decide to shut down the economy just to keep the price lower. is rather getting it backwards.
At which point in time it is unlikely either of Russia or KSA are hurt particularly, given their debt to GDP is about 1/5th the US.
Except that half of Russia's monetary reserve has been frozen and looks to be confiscated, at the same time it needs big money for this war, new pipelines, and to fight off other monetary attacks from the West.
See my post (#5).
Side note: It may be that Russia opposed the recent OPEC+ production cut.
You don’t understand oil.
Did foreign partners and financing leaving Aramco cause Ghawar output to crash?
Venezuela oil is Orinoco heavy. It is difficult to extract regardless of technology or nationality of the guy pressing the button.
Oil is real money. Not created by a central bank. Real, actual substance of value. If you need expertise and you don’t have it in-house, you buy it, but Russia lacks nothing in that regard.
This concept of backwards Russian tech is propaganda. Here are some photos:
In 2011, the US Space Shuttle program ended. The final flight to the ISS was in July. Since then, up to about a year ago, all access to the ISS was via the Russian Soyuz spacecraft. Here is a picture of the interior simulator:
https://www.esa.int/ESA_Multimedia/Images/2010/11/Interior_of_a_Soyuz_TMA_simulator3
From ISS Expedition 21 to Expedition 61, US astronauts could not reach the ISS any other way than Soyuz. Think carefully about that. The US had no manned space program that enabled access other than by means of Russian tech.
Russia’s oil comes from Siberia, the Caspian and the newest locales in the far east of the country, including Sakhalin. Exxon terminated involvement. The Japanese, who will be dependent on gas from Sakhalin-2, did not. They are not gas experts regardless.
The Caspian is the new source of riches. Kashagan is 15 years behind schedule for Kazahkstan, but Geology doesn’t care about mankind’s schedule. The gas is now flowing. The oil is now flowing, on the CPC pipeline, westward to the tanker port in Russia on the Black Sea.
The price of oil and gas don’t matter very much. Their price is measured in joules. The Federal Reserve tries to print diesel. Doesn’t ever succeed.
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