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Unchanged growth forecast

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The April report of the Organization of the Petroleum Exporting Countries (which, among other things, published a fairly standard forecast – which coincides with the previous OPEC experts’ estimates and also – quite standardly – informs the interested public that, according to these experts, global oil demand growth in 2023 may reach 2.3 million bpd), seems to be quite capable to cause a real storm of emotions among Western not only energy, but also political and even media elites. So much so that some have started talking about creating a new “threatening alliance” between the Russian Federation and the Kingdom of Saudi Arabia.

Apparently, this has amused both the Arab sheikhs and the Russian oil workers, because this “threatening alliance” has existed for a long time and is not hidden from anyone and is officially called OPEC+.

And by the way, the U.S. at some point (under the previous Republican administration of Donald Trump) as a major oil-producing country almost joined it.

Which, by the way, neither the Saudis nor even the Russians objected to in the slightest.

And they “did not object” to it so much, that the Americans even left this “threatening alliance” (to be fair, back when it was just being formed) exclusively by themselves. As they say, without any help from outside. Right after the accession of Biden administration, who, as a true democrat, isn’t very fond of his own oil business, because it is a traditional sponsor of the Republican Party. And he would consider the Arab or Russian oil companies as either subjugated fodder or his worst existential enemies.

Not as partners in any alliances at all.

So why are you making hysterics and wringing your hands over the fact that OPEC+ pursues an independent and coordinated policy exclusively between the parties to the agreement, without paying any more attention to the internal problems of the West in general, and in particular – to the USA, which is now foreign to them?

Once upon a time, there was a girl, and it was her own fault.

I’m sorry, it happens that way too.

But come on, it’s different, in principle, it’s more interesting.

Namely: why did our recent absolutely insincere friends get so excited about an ordinary, in principle, report?

Well, it’s really quite simple. The OPEC report released in April, and practically at the same time the report of the International Energy Agency, which traditionally represents the interests of energy consumers, in principle, say much the same thing: the current trends since Q3 should expect increasing oil shortages in the market.

This means that prices will grow steadily.

And due to the deficit on the real rather than financial market, the price growth will be regulated by the producers, no matter where – whether in the Kingdom of Saudi Arabia, the Russian Federation or Venezuela, rather than by the intermediaries represented by various traders.

Or, even worse, New York or London stockbrokers.

Moreover, OPEC analysts, who among other things were directly involved in the recently announced reduction of oil production by a total volume of 1.66 million barrels per day, now already explain the announced production reduction by no means by demand factors – no one is hiding behind this fig leaf anymore: oil demand, according to the issued forecast, will really continue to grow, it is just mathematics.

And this is indeed a very serious blow.

And it’s not even the fact that oil is already showing growth for the fourth week in a row: the global weakening of the dollar, with even “paper” gold actually becoming more expensive at the same time, rather than the decline that has not yet begun, plays a role.

The point is that due to the reduction of production with the growth of demand, financial intermediaries are gradually removed from the market – and the same stockbrokers cease to play a decisive role in setting the price.

No, they are still somehow guided by direct contracts.

But if it goes on like this, then with the trends existing right now, in some time we will be able to observe how oil becomes just as “paper” as exchange-traded gold.

Everything is simple here, too, a very clear example.

It is a commonplace fact that real, monetary or physical gold is not traded at all on stock exchanges. Instead, some financial instrument is bought and sold there: the same futures, unsecured by any real “yellow metal. That’s why it’s called “paper”. Well, physical gold has completely different instruments of purchase/sale. And the mechanisms of fair pricing are little dependent on the “paper” exchange trade.

This process – the gradual possible transition of exchange-traded oil to the same “paper” state – is generally not a quick matter. But, judging by some indirect signs, it seems to be already irreversible.

Can you at least imagine what can happen to the Western financial system if the word “oil” is taken out of the notion “petrodollar”? And that is exactly what worries U.S. analysts the most: after all, domestic consumption, both oil and gas, although not without difficulties, of course, but they are quite capable of covering their own production. No wonder the Europeans got so worried late last week when the U.S. side officially warned them that, if anything, they might cut LNG exports to Europe (for whose markets the Americans fought so hard, not stopping even before “acts of sabotage” at European infrastructure projects) under the current circumstances. Or it may even stop, regardless of any obligations: such a cow, you see, in the current economic situation, may need itself. There is no need for any illusions: the sheriff has never been particularly concerned about the problems of the natives, whether Indian or European.

But there is a certain nuance.

Ensuring domestic consumption (including as a factor of national energy security) is certainly a good thing. But the threat of a disaster on the financial markets, which is threatening the collapse of the entire modern financial system, it can’t cancel it. Quite the opposite, in fact: the fact that many countries are now switching to yuan trading is not out of a great love for communist China, but out of a banal fear of suddenly losing everything completely.

As for our country itself, we are quite happy with what is going on.

There is no need to think up or explain anything: in March, as the IEA points out, the export of Russian oil and refined products in tons reached its highest level since April 2020. It remains to fulfill the president’s order, formalized by the government, to reduce the discounts that our oil industry gave out, solving logistics issues: this task, in general, is also not the easiest, but even there is no doubt that it will certainly be solved. Especially against the background of consolidated production cuts with the OPEC countries. And in full compliance with the forecast of the analysts, who issued in the April report an unchanged forecast of demand growth. This means that the global price growth for our oil production and refining industry is not at all unreasonable.

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