Saudi, Russia, OPEC and Oil

We offer to your attention a summary of the key issues which are more likely to drive the oil price in 2017, prepared by Chris Weafer, Senior Partner at Macro-Advisory Ltd in Moscow.
  • The verbal/political support for the production deal by OPEC and Russia should be enough to support the price of Brent crude close to $55 p/bbl over the winter and early spring. 
  • There is no reason to expect the price to spike much higher because of the prospect for increased US shale volumes if oil averages above $55 p/bbl. The evidence of compliance is more likely to disappoint the market in Q2.
  • The greater risk is for the price to drop back to $50 p/bbl (or high $40s p/bbl) in Q2 or early summer, if (either) Libya delivers on its production plans, Nigeria fixes the damaged infrastructure, US shale output rises steadily or Russia misses its promised target cuts.
  • But the risk of a drop to mid or low $40’s p/bbl is probably now gone because of the greater willingness of Saudi Arabia to take action to prop the price if/when required. 

Article by Chris Weafer, Senior Partner at Macro-Advisory Ltd in Moscow, published on on 19 December 2016

weafer Photo 13

Oil price and ruble exchange rate to determine Russian asset prices in 2017

Coming into the last weeks of 2016 Russian equities have been the star performer amongst the major global asset categories. Over the year to December 15 the ruble denominated MICEX Index rose 26.7%. That compared with a gain of 8.2% for the MSCI EM Index. The dollar denominated RDX (Russian DR) Index is up a much more impressive 51.1% in the same period.

Optimism is also very high that Russian equity indices will also be the best performers through 2017 as evidenced by the fact that EPFR-tracked Russia-focused equity funds attracted $451mn in the week to December 14 – the highest weekly inflow since the first quarter of 2011, while the largest Russia ETF saw its asset value rise 33% through a mixture of price appreciation and new subscriptions.

But what are investors actually betting on over the next six to 12 months? What are they assuming will happen to drive asset prices higher?

Politics always looms large in terms of investment risk. As a very unusual year ends, the international headlines continue to be very mixed concerning Russia. The leadership changes in the US and those now happening and expected across the EU should lead to a less confrontational relationship between the Kremlin and the West than has been the case since 2013. President-elect Donald Trump is a black-box when it comes to geopolitics, but at least he promises to start with a more pragmatic stance towards Moscow than has been the case with the Obama White House. It is of course well understood that President Trump will be restrained in what he can actually do, because he will have to deal with a Congress that remains very hostile to Russia. But a willingness to engage and to take into account Moscow’s core interests is a big improvement from what we have or could have had if Clinton had won. 

Russian Economic Developments - №12 - 2016

12.2016 cover.engExperts of Gaidar Institute for Economic Policy present a survey "Russian Economic Developments" №12, 2016. 

Core themes of the issue:

- The main areas of monetary policy: price stability, resistance to shocks;

- The execution of the federal budget for January–October 2016: shrinkage of the oil and gas deficit;

- Regional budgets: at the end of tether;

- The real sector: factors and trends;

- Russian industry in October 2016: cautious optimism inspired by sales;

- Oil market: low prices retained;

- The implications of tax maneuver: production of oil and petrochemicals;

- Growth of the retail bank deposits has slowed down, however cash savings trend remains;

- Migration in Russia: old trends and new problems;

- Russian institutional investors and privatization policy.

Download Russian Economic Developments - №12 - 2016 


Photo: Minister Sergey Donskoy and Tord Lien

During his official visit to Norway, Russia's Minister of Natural Resources and Environment Sergey Donskoy had a meeting with Norway's Minister of Petroleum and Energy Tord Lien to discuss cooperation between the two countries in the sphere of oil and gas exploration, and development of cross-border hydrocarbon fields.The meeting took place in Oslo on 29 November. Russia and Norway have agreed to share geological data from their maritime border areas and to speed up the conclusion of a deal on seismic mapping along the borderline. The agreement has been submitted to government for approval and that it is expected to be approved before the end of 2016. 

"I have today had a constructive meeting with Russian Natural Resource Minister [Sergey] Donskoy, it was held in a good spirit of cooperation between two countries both concerned about a reliable and secure oil industry in the Barents Sea", Tord Lien underlined after this week’s talks in Oslo. "We believe there are significant resources along the border," added Tord Lien after the meeting. "It is clear that, should we find resources that cross the border between Norway and Russia, we would have to agree on unitisation and share the revenues," Lien said.

"In addition, we are in the near future likely to sign another important document, the one on exchange of seismic data from the Barents Sea between the Federal Mineral Agency and the Norwegian Petroleum Directorate",Sergey Donskoy underlined.  

Sergey Donskoy also visited Statoil's headquarters on 29 November. As he noted during the meeting, that the ratio of reserves and resources is such that the discovery of large and unique deposits on the shelf is very likely. Statoil press spokesperson Erik Haaland stated that the meeting included a "general overview of Statoil’s activities in Russia". 

Press release from the Norwegian government can be found here (in Norwegian)  

Press release from the Russian govermnet (in Russian) 


Photo: Sergey Donskoy and Monica Meland

OSLO, November 28. /TASS/. Moscow and Oslo plan to sign several new agreements in different spheres at the upcoming session of the inter-governmental commission on economic, industrial and scientific & technical cooperation in the spring of 2017, Russia’s Minister of Natural Resources and Ecology Sergey Donskoy told TASS on Monday.

"In the second half of April (in 2017), the session of the commission should take place with participation of the Norwegian minister. I hope that we will prepare all necessary proposals by that time. We plan to sign several agreements — in the spheres of scientific & technical cooperation, regional cooperation, energy," Donskoy said after the meeting with Norway’s Minister of Trade and Industry Monica Mæland on 28 November 2016 in Oslo.

The ministers, who are also co-chairs of the inter-governmental commission, agreed to resume sessions that have not been held since June 2013 due to cooling relations between Russia and the West. Mæland said that Norway is interested in resuming political dialogue with Russia on issues of trade and economic cooperation and wants to maintain good neighborly relations with Russia. “The meeting with the Minister Donskoy was constructive and positive," noted Monica Mæland. 

"At the meeting with Mæland, we discussed what has been done since 2014 at the level of commission’s working groups. We also continue to cooperate with Norway in the sphere of oil & gas. Lukoil and Rosneft that are working on the shelf here, have continued their operations throughout all this time. Other Russian companies are also considering the potential of Norwegian shelf," Donskoy said.

"In general, we stressed that many questions have been accumulated that need to be resolved, along with spheres that need to be developed," he noted. "The emphasis was made on overcoming the decrease in Russian-Norwegian trade turnover. Resolutions are needed to re-launch old spheres and start developing new spheres. Today, for instance, it was proposed to develop pharmaceuticals," the Russian minister added.

In January-September 2016, the volume of Russian-Norwegian trade turnover decreased by 6.3% in comparison with the same period of 2015, and reached $876.9 million. In 2013, before Norway joined the regime of European Union’s sanctions against Russia which prompted Moscow to introduce counter-sanctions, the bilateral trade turnover exceeded $3 billion. The volume of exports of Norwegian fish to Russia was worth $1.06 billion in 2013.

Read full article in English at 

An article contributed to today, November 9th, by Chris Weafer, Senior Partner at Macro-Advisory Ltd in Moscow

weafer Photo 13

What does a Trump Presidency mean for Russia?

Finally, the most divisive and disruptive election in modern US history is over. Donald Trump will occupy the White House for at least the next four years, starting in late January. The question that many in Russia and those who have, or are considering investing in Russia, are asking is what does a Trump president actually mean for Russia risk? The perception widely held before the election is that Trump would have a friendlier disposition towards Russia and President Putin personally and that he “could do business with him”. The extension of that being that Trump would be good for Russia and for investors in Russia. But, is that assumption overly naïve, i.e. the default assumption in a bitterly contested election, or can both countries now enter a new friendlier phase?

There is no doubt that Russia, in particular the perception of Russia in the western media, has suffered considerable collateral damage during the latter part of the US presidential election. The Kremlin was all but accused by US security agencies of hacking into the Democrats email system and that translated as an indisputable fact in the media. President Putin was vilified as deliberately interfering in the election process. The reality is that no matter what Trump may personally want, it will not be easy to simply suppress all that bad feeling and pretend it never happened. The relationship between Washington and Moscow is today as bad as it has ever been since the end of the Soviet Union. Many people believe that the two sides are close to entering a new Cold War while others now accept that to be already the case.  

So let’s assume that President Trump will, at least initially, be more open to rebuilding a better relationship with President Putin. What can he actually do to make that happen? 

Norwegian-Russian Business Journal №2, 2016 (in English with Russian summaries)

NRBJ nr2 2016 coverThe Norwegian-Russian Business Journal is the journal for NRCC members, where subjects of relevance to the economic cooperation between Russia and Norway are discussed.  

The latest issue was published in October 2016 and contains articles about activities of NRCC and its member companies, recent developments and updates on Russian and Norwegian markets and relevant news from Norwegian and Russian business communities. This issue's "Economy and Trade" section contains the latest statistical evaluations of the Norwegian-Russian  trade volume for the period January-June 2016. Evaluations show the share of the largest product group in export / import volume between the two countries.

Among other interesting articles, you can find interviews with Liv Monica Stubholt, Chair of the Board of the Norwegian-Russian Chamber of Commerce, Ole Andreas Lindeman, Norway's Consul General in Murmansk, Lars Georg Fordal, newly appointed Head of the Norwegian Barents Secretariat, and Arild Moe, Senior Research Fellow at the Fridtjof Nansen Institute of Oslo. A separate section of the journal covers current status of Norwegian academic cooperation with Russia, while others feature cooperation in aquaculture and oil & gas industry sectors. 

Please download here Business Journal in pdf format


The aim of the NRCC is to stimulate and improve business relations between Norwegian and Russian companies regarding import, export, shipping, business development, tourism or investment activities. More...


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