SANCTIONS VS PRICES
Oil prices that have plunged to a 27-month low are inflicting damage on a Russian economy already contending with escalating sanctions from the U.S. and European Union over its role in Ukraine.
The U.S. and EU have targeted individuals, companies and the finance, energy and defense industries to punish Vladimir Putin's government after Russia annexed Crimea and gave support to separatists in eastern Ukraine. While Schlumberger Ltd. and Exxon Mobil Corp. scaled back oil-related operations in September, that didn't stop Russian production of crude and condensates from rising to near a post-Soviet era record.
"In the short-term, the falling oil price will be a big blow to the economy, especially if it reaches $80 a barrel," Alexei Kudrin, the finance minister from 2000 to 2011 who helped return Russia's budget to surplus, said by phone today. "However, in the long run, the sanction will have a more serious impact."
Russia will require an oil price of about $104 to balance its budget in 2015, Sberbank estimates. Brent crude, a benchmark for more than half the world's oil including Urals, Russia's main export blend, declined more than $20 since its 2014 peak in June and traded at about $92 a barrel today. It closed at $92.31 on Oct. 3, the lowest since June 2012.
Russia may have to cut spending if oil falls below $80 and stays there, according to Vladimir Pantyushin, chief strategist at Sberbank. The futures curve for Brent crude shows prices ranging from $93 to $96 a barrel next year, having averaged $107 so far in 2014.
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U.S. EIA - Energy companies’ free cash flow—the difference between cash from operations and capital expenditure—was $119 billion for the four quarters ending June 30, 2018, the largest four-quarter sum during 2013–18 Companies reduced debt for seven consecutive quarters, contributing to the lowest long-term debt-to-equity ratio since third-quarter 2014
OPEC - Total oil demand for 2018 is now estimated at 98.82 mb/d. In 2019, world oil demand growth is forecast to rise by 1.41 mb/d. Total world oil demand in 2019 is now projected to surpass 100 mb/d for the first time and reach 100.23 mb/d.
ARAB NEWS - Oil exports from southern Iraq are heading for a record high this month, two industry sources said, adding to signs that OPEC’s second-largest producer is following through on a deal to raise supply and local unrest is not affecting shipments.
PLATTS - The International Energy Agency expects the US to account for 75% of the global growth in natural gas exports over the next five years, a bullish outlook for LNG developers facing challenges at home getting projects off the ground and abroad with tariffs affecting trade flows.