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Press review: WTI oil price plunges below zero and US threatens ‘star wars’ against China

Top stories from the Russian press on Tuesday, April 21

Izvestia: US oil crashes below zero first time in history

 

The price for US benchmark West Texas Intermediate (WTI) May oil futures lost 300% and plunged below zero by almost $40. This has not happened in the history of the market. This means sellers were paying buyers to take oil off their hands.

The technical oil failure was caused by speculative players who sought to get rid of US oil under any conditions, experts surveyed by Izvestia noted. This situation does not threaten Brent oil, but will create pressure on its value, and after that on the ruble. However, this will not last. Market participants expect to see stabilization in connection with the OPEC+ deal and the revival of industrial production in China.

Those who do not have time to sell off May futures will have to receive physical volumes of energy. The so-called super-cargo situation has emerged on the market. The cost of owning US oil has become higher than not owning it. "Companies are selling at a loss, so as not to spend money on well conservation and not suffer even greater losses, waiting for a recovery in the price in the coming months," Director of the BCS Broker sales office Vyacheslav Abramov explained to Izvestia.

The current decline in the WTI price is mainly due to the actions of speculative players in the financial market, Anton Pokatovich, chief analyst at BCS Premier told Izvestia. Although exchange analysts and oil market experts called the situation technical since June’s WTI futures were trading at $21, it created another negative precedent. And its consequences can be extremely serious, especially for the Russian ruble.

Head of the Analytical Department at AMarkets Artem Deev believes that the dollar will move towards 80 rubles in the near future and may even cross it. In the short term, the exchange rate may collapse to 85-90 rubles per dollar.

"The WTI contract with delivery in June is 70% more expensive than the May contract. This shows optimism in the market regarding the restoration of oil prices," Abramov said. According to him, market participants expect stabilization in connection with the OPEC+ deal and the restoration of industrial production in China. Therefore, the damage, even for the Russian economy, as a whole will not be lasting, he added.

As for the United States, prices on the local market will be saved by a decline in production, Deputy Director General of the Institute of National Energy Alexander Frolov told the newspaper. Since late March, oil output here has already declined by 700,000 barrels per day, and the decline will continue.

 

Nezavisimaya Gazeta: US gearing up for ‘star wars’ against China and Russia

Washington created a combat group designed to establish control of near-Earth space. US space forces have received weapons that can destroy their opponents’ telecommunications, Nezavisimaya Gazeta wrote, adding that the Pentagon sees China and Russia as adversaries here since they can allegedly can spy on the US from space. Therefore, in the event of a conflict, their satellites would have to be neutralized. The Pentagon is focusing on China, which has the second number of satellites in orbit after the United States.

According to media reports, it is now clear, at least in general terms, what the Pentagon has. Within the US Space Forces, there are 16 units equipped with ground-based devices aimed at enemy satellites. They are designed to block satellites and shut off their communication capabilities, Nezavisimaya Gazeta wrote. They will be used to break the enemy’s information transmission so they cannot coordinate any troop movements or actions. The Pentagon intelligence agency justifies the militarization of space by citing threats from China and Russia, the newspaper wrote.

Retired Colonel Viktor Litovkin told Nezavisimaya Gazeta, "Russia has not tested an anti-satellite missile, since there is no need for such a rocket." Moscow’s missile defense was launched for the defense of the Russian capital, he said, noting that tests of such missiles have been going on for several years. According to Litovkin, an attempt to scramble or destroy a satellite is an act of war. Understanding this, Russia and China have repeatedly raised the issue of banning weapons in space, but the US has categorically rejected such an agreement.

Officials in Washington have been increasingly labeling China as the main geopolitical threat to the US. "China is in second place after the United States in terms of satellite constellation. They are also engaged in anti-satellite weapons. There were reports of preparations for cyber attacks on enemy satellites. They are also working on long-range anti-ship missile systems," Vasily Kashin, a leading researcher at the RAS’ Institute of Far Eastern Studies told the newspaper.

 

Kommersant: India mitigates quarantine, ready to help Russia, US to fight coronavirus

India softened its lockdown on Monday, which had been introduced on March 25 due to the coronavirus pandemic. Authorities say they are in control of the situation and are ready to help their partners, in particular, Russia and the United States. Thus, 100 mln hydroxychloroquine (an anti-malarial drug) pills used to treat coronavirus will soon be sent to Russia, Kommersant wrote. However, it might be too early to talk about the situation in India returning to normal, as the country has recently announced the largest increase in the number of coronavirus cases per day.

Russia’s Ambassador to India Nikolay Kudashev said "the Indian side reached out to Russia’s request." Kremlin spokesman Dmitry Peskov also commented favorably on the news. The fact that the Kremlin issued a separate statement is very remarkable in itself. Prior to that, Moscow had not commented on foreign deliveries of drugs to Moscow for the pandemic, Kommersant wrote.

There was no question before India whether to grant Russia’s request in these difficult times, Indian Ambassador to Russia Bala Venkatesh Varma told Kommersant. He noted that pharmaceutical industry remains one of the pillars of Russian-Indian cooperation and moreover, the decision highlights the special friendship between President Putin and Prime Minister Modi.

According to the envoy, the goal of India and Russia is to strengthen bilateral cooperation in the pharmaceutical field and work together to reform international institutions, including the World Health Organization.

Meanwhile, the supply of Indian antimalarial drugs will continue also to the United States. Previous export restrictions were dictated by the desire of the Indian authorities to ensure availability of supplies to meet domestic needs, while Indian diplomats called these measures "temporary." Ambassador Varma assured Kommersant that the batch of drugs that Russia will receive in the coming weeks will be produced from Indian raw materials.

 

Kommersant: Moscow-St. Petersburg high-speed railway requires $9.9 bln in state funding

The updated financial model of the Moscow-St.Petersburg high-speed railway includes allocating 750 bln rubles ($9.9 bln) in state support, Kommersant wrote citing a source familiar with the main provisions of the financial model. According to the newspaper, the total funding of the project is estimated at 1.7 trillion rubles ($22.5 bln), the financial model is balanced with at least 35% government participation.

The financial model is supposed to attract a capital grant in the amount of 200 bln rubles ($2.65 bln). In addition, discussions are underway on a loan from the National Wealth Fund (NWF) for 380 bln rubles ($5 bln) at a general rate of 5%. However, according to a Kommersant source, the new NWF approach assumes an average rate of 6.6-6.7%, at which the financial model becomes unbalanced. The Ministry of Finance did not tell the newspaper, under what conditions the rate could be reduced. In addition, Russian Railways will provide 192 bln rubles ($2.54 bln) for the venture as part of its investment program, another 200 bln rubles ($2.65 bln) will come from other project shareholders.

The estimated revenue of the project in 2030 will amount to 147 bln rubles ($1.94 bln), and in 2040, to 338 bln rubles ($4.47 bln). The net present value is 686.6 bln rubles ($9.09 bln), with an internal rate of return of 9.4%, and the discounted payback period is 30.8 years.

Earlier, Kommersant wrote that the railway will not be cost-effective at the expense of passengers and suggests state support of around 600 bln rubles ($7.94 bln). According to the newspaper, the project included two sections of the line: St. Petersburg-Moscow and Moscow-Nizhny Novgorod. However, under the current model there is no information about the second section.

 

Izvestia: ‘COVID-19 epidemic is massive, but Ebola was worse’ - virologist

Despite the fact that the number of cases of COVID-19 in Russia decreased on Monday, April 20, significantly compared to the previous day, it is too early to talk about a breakthrough in the fight against coronavirus, Deputy Director of Pasteur St. Petersburg Scientific Research Institute of Epidemiology and Microbiology Alexander Semyonov told Izvestia. He suggested observing the number of infected cases for several days. The virologist also assured that antibody tests will appear in Russia for everyone within a month and a half.

"Measures to contain the epidemic in Russia have been taken, but the number of infected people is such that it’s impossible to calm down. We must strictly follow the rules, so that we do not end up with the Italian scenario," he told the newspaper.

"The COVID-19 epidemic is massive, but Ebola was worse. The current pandemic cannot even be compared to it, because the mortality rate from Ebola fever, especially at the initial stage, was 90%: out of ten cases, nine died. Later, it was possible to reduce it a little, but in any case it is incomparable with the COVID-19 epidemic as far as mortality goes," the expert added.

Speaking about antibody tests available to everyone in Russia, Semyonov said he believes it will happen the next month and a half. "Antibody tests will be done for the people at risk first: medical workers, seniors, those who have been in contact with patients," he said.

The virologist believes that discussions about the artificial origin of the coronavirus "are needed, it seems to me, to hide either the incompetence of the healthcare system or omissions that were made during anti-epidemic measures". "To write off your inability to cope with the infection on to some "evil people" bringing us an artificial virus. And if it were natural, we would certainly have coped. We can see through it," the expert told Izvestia.

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