Russia Says It Can Weather $30 Oil for up to 10 Years

Or $25 oil for 6

Editor’s note: Russia’s budget breakeven price was previously reported as $42. With a 15 percent ruble-to-dollar decline on the oil price collapse news from 65 to 75 that should now be $38. Add $530 billion in FX and gold reserves and the Russian boast doesn’t seem too far off.


Now that both OPEC+ and OPEC no longer exist, and it’s a free-for-all of “every oil producer for themselves” and which Goldman described as return to “the playbook of the New Oil Order, with low-cost producers increasing supply from their spare capacity to force higher-cost producers to reduce output”, the key question is just how long can the world’s three biggest producers – shale, Russia and Saudi Arabia…

… sustain a scorched-earth price war that keeps oil prices around $30 (or even lower).

While we hope to get an answer on both Saudi and US shale longevity shortly, and once the market reprices shale junk bonds sharply lower, we expect the US shale patch to soon become a ghost town as money-losing US producers will not be solvent with oil below $30, assuring that millions in supply will soon be pulled from the market, moments ago we got the answer as far as Russia is concerned when its Finance Ministry said on Monday that the country could weather oil prices of $25 to 30$ per barrel for between six and 10 years.

The ministry said it could tap into the country’s National Wealth Fund to ensure macroeconomic stability if low oil prices linger. As of March 1, the fund held more than $150 billion or 9.2% of Russia’s gross domestic product.

Incidentally, this may explain why over the past two years, Putin has been busy dumping US Treasury and hoarding gold: he was saving liquidity for a rainy day, and as millions of shale workers are about to find out today, it’s pouring.

Source: Zero Hedge

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XRGRSF
XRGRSF
10 months ago

I retired from XOM several years ago, but my son is an active petroleum engineer for a major service company. He said that the engineers he knows, who are in fracking operations, were calling him Monday morning looking for stable work. A global oil price below $40 per bbl. will shut down the fracking operations, destroy the banks that hold their notes, and eliminate any hope of the U$ keeping the petro-dollar alive by exporting crude. Also the loss of fracked oil will starve the refined products market of feed stock, and make it necessary for the U$ to import crude. Karma has come full circle.

bob
bob
10 months ago

The Russian economy is a basket case

Its got nothing to offer the world, apart from propaganda, some overrated wiz bangs and oil and gas

Its GDP growth is projected at the slug like pace of about 1.6 % this year, it’ll probably nkt even make that if Corona virus strikes,and the Russian health service really is a pile of shite,just like Iran, so expect them to really suffer

Even Ukraine is projected to do better with GDP growth of 3.5 % this year, no wonder they don’t want anything todo with the bullying failure state of Russia

Canosin
Canosin
10 months ago
Reply to  bob

what a stupid f*cking a*shole you always prove to be……a piece of old dried dogshit has a much higher value than your poorly uttered comment5

bob
bob
10 months ago
Reply to  Canosin

Oh, and just think what this oil price war will do to Russian friend and fellow partner in Syrian crime,Iran!

Its gonna screw them, plus corona virus is already screwing them,so there goes one of russias allies,due entirely to Putin the ‘ Master strategist ‘

Oh, and Putin can try and win the oil price war but his biggest trade partner China is also economically now in the dog house so his cheap oil isn’t gonna be bought as everyone has to now recover from corona,oh, more bad news for Putin,manufacturing is moving out of china, so big sloooooow down in China,big problemo for old rubber chops!

Its not looking good for old rubber chops Putin

itchyvet
itchyvet
10 months ago
Reply to  bob

During my lifetime, I have witnessed manufacturing moving from my own country to Singapore, when the wages there grew as a direct result, manufacturing was moved to Malaya, again when the standard of living there rose as a result, it was again moved, this time to China.In all this, I don’t recall the moving of said manufacturing here and there, effecting Russia in any way.The nations from whence the manufacturing moved from, are still with us and functioning well on their own two feet. I don’t see any difference this time round with China. B.T.W. to where will manufacturing go now, if it moves from China ?

bob
bob
10 months ago
Reply to  itchyvet

Manufacturing is going to Mexico, big win for America as Mexico is a NAFTA member,or whatever they call it now

Plus manufacturing is moving to Vietnam, another big win for USA_as the Vietnamese government wants USA to be their biggest investor,oh, and the Vietnamese don’t really like or trust china, so forget all that blather about Belt and Road stuff there

Oh,double oh, what a surprise,India also doesn’t like china that much or trust them so not much chance of belt and road there

So you have the perfect storm blowing over the so called ‘ axis of resistance ‘

Putin stuck in Syria

A silly oil war which will harm his allies more than him, but then he’s selfish so why should he care

His Iranian allies are busy killing themselves with corona virus,hopefully they’ll spred it to their terrorist proxies in Syria

The Chinese flat on their backs,manufacturing closed down and moving out

All we need now is an outbreak of the virus in Russia to test their very poor health services to complete the misery of the dictatorships of the 21st century

Did i miss anything out?

itchyvet
itchyvet
10 months ago
Reply to  bob

Yep Bob, you sure did. You forgot to tell us Russia closed it’s borders with China in JANUARY and only allowed Russian nationals in afterwards, after they were tested for the virus. China was not happy about it and objected, but the proof is in the pudding. So far Russia has not had even one reported case of the virus. Looks like your gonna be sorely disappointed. Question is though, if Russia had the foresight as far back as January, how come no one else except them, saw it coming ?

bob
bob
10 months ago
Reply to  itchyvet

It doesn’t matter if Russia has closed its borders

Its not even a case of how many people are killed by the virus

The point is Russia is implementing all the measures which will impact negatively into its economy

And thats an economy which even by Putins own admission isn’t exactly brilliant

Combine that with the massive disruption to china and the prognosis for the Russian economy really isn’t good

XRGRSF
XRGRSF
10 months ago
Reply to  bob

A troll with creative writing ability: Fascinating.

bob
bob
10 months ago
Reply to  XRGRSF

Just unfortunately facts and due to the consequences of Putin

So putin has an oil price war with Saudi, how does that benefit Iran, they’re already under massive sanctions,potentially they’ve got the benefits of cheap oil to sell but can’t

Potentially China could buy this oil but can’t and won’t due to the sanctions plus the Chinese economy is now in the doldrums, so they’ll stick with their biggest trade partner, the USA

All this oil war does if it works in Putin’s favour, and its a big if, is buy the Russian economy a bit more time, before the inevitability of energy transactions away from oil starts to have profound effects

Have the Russian got a plan for a post oil world?

Well they don’t really have a plan for their economy as things stand, so unfortunately the medium term and certainly long term future of Russia isn’t looking good

bob
bob
10 months ago
Reply to  Canosin

Facts

Obviously you’re a Putin fan club groupie

Canosin
Canosin
10 months ago
Reply to  bob

obviously a bucket full of shit has a higher IQ and value than your brain will ever be able to grasp …… be sweet now and gtfo

Mohamed Ridzwan Abdul Rahman
Mohamed Ridzwan Abdul Rahman
10 months ago
Reply to  bob

According to the Bank of America, US GDP growth rate this year will be between 1.2% and 1.6%. Looks like Russia will have a better GDP growth rate.

bob
bob
10 months ago

looks about the same,but the difference is usa has the biggest economy in the world, russia is only just in the second division

Jihadi Colin
10 months ago

For the first time in my life I’m regularly reading the financial news and it’s quite interesting. My own analysis is that the world economy is totally manipulated and in fact is basically fictional. The current oil war for instance. If the price of oil can fall so dramatically then that means oil is normally tremendously overvalued.

XRGRSF
XRGRSF
10 months ago
Reply to  Jihadi Colin

The realistic base price of crude is $30 to $35 per bbl, depending on extraction cost. Oil is now realistically priced about where it should be without manipulation by speculators.

Jesus
Jesus
10 months ago

Trump’s moronic boasts that US is a net exporter of oil (US is using 20 million barrels a day while pumping around 14 million barrels a day….I guess math was not his forte), and his meddling in Nordstream 2, the sanctions against Rosfnet for handling Venezuelan oil, came to roost.
Russia’s actions is going to eliminate 5-6 million barrels of shale output, cutting down US production and bragging rights about being the largest producer.

Jihadi Colin
10 months ago
Reply to  Jesus

I see no reason to spare any pity for Trump, but, tell me this (I’m not American): while I’m still convinced that Trump has been preselected by Wall Street for a second term, would a shale oil led market meltdown in America hurt his chances for re-election against a combination of Biden with Killary Clinton as running mate?

Jesus
Jesus
10 months ago
Reply to  Jihadi Colin

Wall Street did not select Trump in my opinion, Wall Street did not want a trade war with China, they were pro globalization, the meltdown in the shale industry might take longer way past the election, a stock market correction and a recession for whatever cause will not bode well for Trump. Whoever the democrats choose will have to untangle the MAGA concept, if Trump stays he will not be able to dig out of the hole he finds himself in.

Jihadi Colin
10 months ago
Reply to  Jesus

I don’t think any politician thinks beyond the next election. Trump right now probably doesn’t care about the hole because it’s not right in front of him.

cechas vodobenikov
cechas vodobenikov
10 months ago

in the past 24 hours crude prices increased 7.5% to nearly 37 $ per barrel …it is the USa that has been devastated—their low quality shale oil now costs more to extract than it can be sold for—-apparently amerikans poorly understand arithmetic

CHUCKMAN
10 months ago

Yes, and a lot of the producers of shale oil are indebted heavily because it’s a capital-intensive operation.

Putin is going to shut down a major American industry.

stevek9
stevek9
10 months ago
Reply to  CHUCKMAN

Already suggestions to put tariffs on imported oil.

Pablo Rivera
Pablo Rivera
10 months ago

Sanction those bastards… Oh, wait!

Anti-Empire