the Unprecedented drop in world oil prices has led to a paradoxical situation in the oil market of Russia in the end of March: pricing formula began to correspond negative values. These formulas are the main benchmark for pricing in the domestic market.
Quote Argus fip West Siberia FORMULA on Monday was equal to minus 1 007 rubles per ton (fip Nizhnevartovsk), and on Tuesday — minus 1 200 rubles per ton (fip Nizhnevartovsk). This means that transportation costs, the payment of export duty and other expenses on these amounts exceeded the average price of Urals (cif Rotterdam August) during these two days.
This situation has caught many market participants, as their prices on oil supply contracts both annual and short-term based on the value of the formula within one month of delivery.
At the end of March the average value of quotations of Argus fip Western Siberia the FORMULA has remained positive, although down by about 12 500 rubles per ton relative to the February level.
Providers worry that a prolonged period of low prices will contribute to zero or even negative profitability of oil sales in Russia.
crude oil Prices can continue to fall and even to decline to single digits due to the weakening demand caused by a coronavirus crisis, exacerbated by the struggle for market share among the leading manufacturers in the conditions of shortage of storage capacity, said industry experts in an interview published Goldman Sachs.
Oil expert and Pulitzer prize winner Daniel Yergin told Goldman Sachs that the demand could fall by 20 million barrels a day in April, or even more, putting on “the largest drop in demand in the modern era”, on the background of a price war Saudi Arabia and Russia.
“If we run out of space in the storage tanks, and oil will not be sold, in 1988, we see a sharp drop in prices to very low double digits, and in some cases to single digits,” said Yergin, adding that low prices may persist for the next few months or even longer.
