A great deal of ink has been spilled over the rise in oil prices since the Organization of the Petroleum Exporting Countries (OPEC) agreed to production cuts on Nov. 30. Leaving aside that oil has not actually surged upwards – the price for Brent crude at closing on Dec. 14 was only 11 percent higher than on Nov. 28 – instead of speculating on the gyrations of the market it is more interesting to figure out the exact oil price that would be geopolitically significant from Russia’s point of view. Russia’s finance minister said last January that Russia could balance its budget if oil reached $82 a barrel, but we have a doctrinal distrust of politicians’ statements, so we wanted to see if we could discover a similar figure – or a more accurate one – on our own.
Russia reports oil-export revenue in both metric tons and dollars. According to Russia’s Federal Customs Service, from January to October 2016, Russia exported $59.6 billion worth of oil, or approximately 213 million metric tons of crude. Converting metric tons to barrels for crude oil is not simple, as each type of crude differs in density; the generally accepted conversion rate for metric tons to barrels is 7.33 (according to BP’s Statistical Review of World Energy). By analyzing Russia’s export statistics this way, it is possible to make two observations. One is that in the first 10 months of 2016, Russia produced almost 5 percent more oil than it produced in all of 2015, which means it needed to sell more this year than the previous year. The other is that we can roughly estimate that Russia thus far this year has exported approximately 5.13 million barrels of oil per day.
From here we have to make a bit of a leap. Russian statistics show that Russia exported $76.7 billion of oil in 2015, when the average price was $41.85. With data from just the first 10 months of 2016, we have to do a little guesswork. But let’s assume for the sake of argument that in November and December of this year, Russia will have exported the average value it exported in the first 10 months of the year (in reality it probably will be a little more), meaning that total Russian oil exports in 2016 will be approximately $71.52 billion. We also must factor in recent comments by Russia’s energy minister that indicate Russia has, at least verbally, agreed to coordinate its oil production with OPEC’s cuts by reducing production by 300,000 barrels per day (bpd) in 2017. We’ll leave the details of when this cut will be implemented (or whether it actually will be implemented) for another time. For now, if we assume that all of that production is removed from Russia’s average production next year, we conclude that Russia will export roughly 4.8 million bpd of oil next year.
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