With difficulty reaching a truce in the oil war, which became a long-awaited result of many months of difficult negotiations on the extension of the embargo on oil production, the world of raw power suddenly appeared on the threshold of a new hard confrontation. Causes of discord at this time may serve as both liquid and gaseous hydrocarbons. According to Bloomberg, soon to Qatar, the largest producer of liquefied natural gas, will be faced with a difficult choice: either to reduce production of LNG to balance the demand and supply for this type of fuel; or to cut the price of liquefied petroleum gas to improve its competitiveness. The last choice of Doha risks being critical for Russia: more than half of the domestic revenues of the Treasury depend on oil quotations, and reducing the cost of “blue fuel” due to low prices for “black gold” threatens the budget of our country the loss of 50-70% of the profits from production of hydrocarbons.
According to Bloomberg, Qatar, from January 1, 2019 seceded from OPEC and concentrated on the extraction and processing of natural gas, already regretting his decision. Asian buyers of “blue fuel”, and then to European consumers because of the epidemic of the coronavirus has sharply reduced purchases of not only traditional types of energy sources, but gradually began to abandon the liquid fuel. It is in these regions more than years ago the middle Eastern Kingdom has redirected the flow of hydrocarbons.
currently, reports Bloomberg, Doha was faced with a difficult choice: Kingdom decides to cut production, gas and LNG production or to support demand by lowering prices for consumers. And it is a choice of two evils. According to the head of analytical Department AMarkets Artem Deev, reducing production, Qatar will have to part with the title of the world’s leading producer of LNG. The first place, and with it part of the market, from is Australia, which is less susceptible to the epidemic of coronavirus.
the Second option threatens loss of profit, but will help to retain the country’s current market share. “Most likely, it is the latter scenario in the near future will be realized. Qatar has increased in the past year, LNG deliveries to Europe to 48%. Now and during the summer in the USA introduced new power States, estimating the shortcomings of Doha, are trying to increase deliveries to the EU and Asia. The excess supply, increasing competition between manufacturers, filling silos, and a record decline in demand — all these factors are pulling prices down. However, such a disposition of things could have been predicted a year ago, when the cost of hydrocarbons began to decline, and LNG from Qatar was one of the most affordable energy on the market”, — said the expert.
Possible actions Qatar in relation to its “blue fuel”, according to analysts, is painfully reminiscent of the situation in the global oil sector in mid-spring this year. The overabundance of “black gold” has forced manufacturers to agree on production cuts to avoid negative prices when selling raw materials. The excess supply of natural gas also can lead to the fact that the storage of “blue fuel” will be much higher than its market value and traders will have to find any sources sale of raw materials, not paying attention to the price.
“In the case of the oil market, this approach eventually led to destabilization of the market and damage its all the major players, — the head of the Luxembourg office of the consulting group KRK Group Nikita Ryabinin. — Implementation of a negative scenario will lead to long-term stagnation of the gas market. For Russia this will be a serious blow to the economy in the face of falling oil prices. In particular, the weakening of the national currency. In turn, for the population of Russia it will mean a further fall in the standard of living and income, which would particularly be felt because of the crisis caused by the epidemic of the coronavirus”.
“For Russia it is time to “perfect storm”: the critical decline in the price of oil and gas, the fall of exports due to falling global demand, problems in the economy because of the pandemic coronavirus. The global financial and economic crisis intensified resource crisis, why Russia’s economy will suffer significant other, as the country’s GDP by 50% formed by the revenue from the sale of hydrocarbons and the finished fuel. If Doha will begin to lower prices for LNG, the demand for “blue fuel” to shrink even more, and the Russian budget will lose this year, 50-70% of oil and gas revenues”, says Deev.
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