Donald will give: experts predict the collapse of OPEC and OPEC+
The media published analysts' statements on the future of OPEC and OPEC+. Experts believe that these international organizations will lose control over the market after President Trump's decision to lift all restrictions on oil production in the United States, as well as against the backdrop of China's declining demand for oil. Izvestia analyzed whether there is a risk of such a development, how the US energy policy will affect global oil associations and how these decisions will affect Russia.
Cheap populism
Tamara Safonova, Associate Professor at the Institute of Economics, Mathematics and Information Technologies of the Presidential Academy, believes that OPEC+ is a powerful alliance that has been demonstrating a high level of productivity and significant influence on the balance of global supply and demand over the past few years.
- The statements of the new US administration about the collapse of world oil prices due to the growth of oil production in the country are rather propagandistic," she says.
According to the expert, the growth of oil production in the United States will be necessary primarily to supply the American domestic market. Thus, by the end of 2024, the U.S. oil balance looked as follows: production - 13.3 million barrels per day, consumption - 20.4 million barrels per day. The deficit of domestic production resources to ensure full domestic consumption may amount to 7.1 million barrels per day.
- And even if Trump's stated goal to increase oil production in the U.S. by 3-4 million barrels per day is achieved, which will not happen quickly, the country will still remain an importer of oil raw materials against the background of steadily growing consumption," Safonova summarizes.
The growing need for energy is explained by the general direction of Trump's domestic economic policy.
- First, his plans for the crypto industry, which are inevitably linked to the growth of electricity consumption and will require the commissioning of new generating capacities. Second, US trade policy on oil imports from Mexico and Canada. The latter is studying retaliatory measures that will lead to an increase in the price of raw materials," the expert notes.
The Russian Ministry of Energy did not answer Izvestia's questions.
Unequal conditions
They have been talking about the collapse of the oil cartel for a long time. Nevertheless, most of the experts interviewed agree that there is no sense in the dissolution of the association, despite the loss of part of the market after the reduction in production.
- That is why at the end of 2023, a number of African countries opposed the policy of reducing production, suggesting to increase supplies and fix profits while the cost of oil is at $80 per barrel, - says Irina Kezik, head of the Tekface project, an expert of the inter-industry expert and analytical center of the Union of Oil and Gas Producers of Russia.
Now, in order to fulfill the task of restoring market share, members of the oil cartel will have to make concessions, primarily in terms of price.
- In this regard, the words of Maxim Reshetnikov, the head of the Ministry of Energy, at SPIEF-2024 come to mind," she continues. - He said that Russia should be ready for zero mineral extraction tax. This is a consequence of lower prices for raw materials, which will not be comfortable for all market participants: shale oil production is not penny-wise.
U.S. President Donald Trump
According to BloombergNEF, in 2024, for all U.S. shale oil fields, including the most expensive ones, the price of oil, at which the profitability of the industry is reasonable, jumped by almost 50% to $86 per barrel.
- At the same time, for OPEC+ producers, the figure is many times less, which would allow for an increase in production but a reduction in price to a comfortable level for all OPEC and OPEC+ members," Kezik said.
Kezick argues that although the U.S. is today the leader in oil production - 13.481 million barrels per day - it will not be able to "flood the market" with its crude.
- The demand for oil in 2025, according to OPEC forecasts, will be higher than 105 million barrels per day. And the U.S. is not adding any allies, given Trump's tough policy. Canada is a case in point. Conservative Prime Minister of Ontario Doug Ford said that Canada, in response to Trump's tariffs, is ready to make electricity unavailable to Americans by cutting off energy supplies to the U.S.," she said.
Already there has been
An attempt to suspend OPEC+ agreements on production cuts already happened in April 2020, when at one point Brent oil prices fell to historic lows of about $20 and Urals to $10.5 per barrel, recalls Olga Orlova, head of Industry at the Institute of Oil and Gas Technologies.
- At that time, the participants of the association failed to agree on an extension amid news about the growing coronavirus pandemic, and the Saudis started a trade war. The market reacted with a shock, from the consequences of which it took a long time to recover. The coronavirus crisis was intensified by the energy crisis, in which any investment in the oil industry became meaningless and the budgets of exporting countries lost billions of dollars. Having realized the mistake, the OPEC+ members agreed to coordinate their actions again, and the situation began to improve," the expert explained.
According to the expert, in the "black" for the oil industry in 2020, one hundred and fifty oil companies from the United States declared bankruptcy.
- Some of them were helped by injections from the budget, corporate mergers followed, but the help did not reach all of them, there was nothing to cover credit obligations," she said.
In 2025, if the oil market collapses, drilling new wells in the same United States will be unprofitable with minimal or even no profit. Every year it becomes more and more expensive to drill a shale well, and exploration will slow down as a consequence.
- Donald Trump, for some unknown reason, has forgotten a fresh history lesson. We have already seen what happens when the oil market collapses. Making a rival country (Russia) mad by reducing the profitability of the oil sector is not a comparable goal compared to the risks to which such a policy exposes its own taxpayers," Orlova summarized.
