OPEC+ May Increase Production Amid Pressure from Members

— We see that OPEC+ has set a course for restoring production volumes and has begun to pay much less attention to the price. And, apparently, this course will remain the same for now. If, of course, the price of Brent falls to around $50 per barrel, maybe they will reconsider something. But it is clear that the current corridor — somewhere around $60-65 per barrel — is perceived by OPEC+ participants as acceptable for continuing the strategy of increasing production volumes.

— Where is this line?

— Maybe if it is less than $60 per barrel, then they will reconsider their decision. But for now we see that they have decided to increase quotas. Perhaps the calculation here is that low current prices will also stimulate growth in demand. And it is OPEC+ that will cover this new demand with its volumes. There is clearly a strategy of fighting for market share. And this again comes from the fact that many OPEC+ participants previously, in fact, expressed their dissatisfaction with the fact that production volumes were reduced and kept at a low level. And a number of countries that are not part of this deal, on the contrary, are increasing their production. These are Guyana, Canada, Brazil, and the United States. Therefore, it is necessary to fight for market share. Otherwise, apparently, there was a threat that a number of participants would withdraw from the deal. And then the whole deal would fall apart. For Russia, of course, the situation is very unpleasant, because our budget generally included $69.7 per barrel, while the exchange rate should be 96 rubles per dollar. Our ruble is now much stronger, and the price of our Urals is around $50 per barrel. That is why the Ministry of Finance has just overestimated the budget deficit. If initially it was planned at around 0.5% of GDP, now it is already around 1.7%. Given that we have money in the liquid part of the National Welfare Fund for about 1.5% of GDP. It turns out that if everything continues like this, we will eat up the liquid part of the National Welfare Fund in 2025. The Ministry of Finance will also need to enter the borrowing market more actively. And this is if the current situation persists. And if it worsens, then it is quite possible that by the second half of the year we will have to carry out a certain budget sequestration, revise the terms of expenditures. Perhaps, increase taxes. Perhaps, as the Ministry of Finance planned in 2023, we will have to reduce payments on the damper, which will lead to an increase in the cost of fuel on the domestic market. That is, the state will have to take some measures here. For now, our deficit is simply larger than planned. This is not a disaster. We have measures to eliminate all of this, but we are not within the budget parameters.