Oil: The barrel once again raises the vital bar for the Angolan economy

Anticipating another difficult week, and probably a month of weak results for the oil sector, troubled for weeks by repeated hikes in interest rates in the United States and the European Union, the Saudis and the Russians announced today new drops for the month of August, which brought the barrel of Brent out of the submersion in which it had been since June 22.

Saudi Arabia and Russia, the world’s two largest crude oil exporters, and of the three largest producers, with the United States joining the group, have been together in OPEC+ since 2017, when they achieved that the addition of pressure capacity through production controls, it was more useful to their interests than the cockfights in which they had engaged up to that time. And now that the synergy has proven itself, because, being the de facto leaders of OPPEP+, a “cartel” which represents more than 50% of world production, around 102 million barrels per day (mbpd), and to which Angola belong wholeheartedly as early as 2007, realizing how obvious it was that the markets would penalize prices, they opted for a forward-looking approach and announced further cuts.

This, while it was already expected that the data of the global economy, crushed by the poor results of China and Western Europe, and the tragic foreshadowing of new hikes in key rates by the American FED and the ECB, crush the value of the barrel even more, here… in Riyadh and Moscow, we show how chess is played with the West, because changes in Western interest rates aim to reduce the Inflation and this has its nemesis in energy, therefore they are aiming at the heart of the Russian and Saudi economy, but also of Angola, one of the countries most dependent on crude oil exports.

On the Saudi side, the novelty was the extension of an additional and voluntary reduction of 1 mbpd, which should end on July 31, for an additional month, while on the Russian side, an additional reduction in its production of 500,000 bpd was announced, which, despite expressive national productions, both around 9.5 mbpd, is still a relevant effort, especially for the Russians, struggling with a war in Ukraine which is a gigantic drain on resources. These cuts are significant because they add another 1.5 mbpd to the 4 mbpd the cartel has in progress, which is equivalent to 1.5% of global production, Reuters says. These shifts in the global landscape must have enraged North Americans and Western Europeans trying to free their stifled economies from the grip of inflation.

Although the well-known sanctions against Russia alone have removed hundreds of thousands of barrels from the markets, even with the diversification of its exports to Asia (China and India). Which, all in all, means that a barrel of Brent, around 2:40 p.m. this Monday, Luanda time, was worth 75.65 USD, or 0.33% more than at the previous close, and 65 cents on the dollar above. above the reference price used. by the Angolan government to prepare for OGE 2023.

Complex Angolan accounts

For Angola, which is one of the most dependent producers and exporters of the commodity in the world, due to the rare economic diversification, this consolidation of Brent prices slightly above 75 USD is, all the same , a sensitive data and of little help, also, to fight against the serious crisis of inflation and the exchange rate that the country is going through.

If this continues for a long time, the consequences could be quite negative because the oil sector stops generating the surplus that the government needs to invest beyond the essentials. And the risks of underfunding by the State with regard to the commitments made in the OGE, could be serious, because of the irreplaceable role, for the moment, in the GDP.

Oil still today represents more than 90% of its exports, corresponds to up to 35% of the GDP and guarantees around 60% of the operating expenses of the State. Incidentally, João Lourenço’s government is still concerned about a continued reduction in oil production, which is estimated to be around 20% over the next decade, currently standing at just above 1.1 million barrels per day. (mbj), far from its historical level. maximum of 1.8 mbpd in 2008.

Behind this decline, among other factors, a disinvestment of the entire sector, from research to maintenance, when we know that the national offshore, with the fields in operation, has been in decline for several years due to its ageing, i.e. , due to its loss of crude oil to extract and the multinationals do not show the interest of the last decades in betting on the country.

The issue of urgent energy transition, due to climate change, with fossil fuels being the bad guy, is another factor that blurs the importance of the oil sector in Angola.