The global oil market is balanced and the current price of oil fully reflects this market situation, Russian Deputy Prime Minister Alexander Novak said in an interview with Russian television channel Rossiya 24 on Sunday.
“We have seen low volatility over the past few months, which means that the market is balanced and today’s prices undoubtedly reflect this market situation,” said Novak who was promoted from energy minister to deputy prime minister last year. Novak is still in charge of coordinating Russia’s oil policy with OPEC and co-chairs the monthly OPEC+ panel meetings together with the Saudi Energy Minister, Prince Abdulaziz bin Salman.
According to Novak, the price of oil will average in the range between $45 and $60 per barrel in 2021.
Oil prices have rallied in recent weeks, supported by the OPEC+ production cuts, the vaccine rollout and vaccinations, and more recently, by falling COVID-19 cases and hospitalizations in the world’s biggest economy, the United States.
Analysts say that the oil production curbs by OPEC+ and its leaders Saudi Arabia and Russia are set to tighten the market in the first quarter. Saudi Arabia has also said it would reduce its crude oil production by an additional 1 million barrels per day (bpd) beyond its quota in the OPEC+ pact this month and next.
Russia, the leader of the non-OPEC group in the OPEC+ pact, is estimated to have stayed within its 125,000-bpd allowed production rise in January. According to Reuters estimates, Russian oil production rose last month, but the 120,000-bpd increase in production from December was lower than the 125,000-bpd additional allowed rise. Under the latest OPEC+ agreement from January, Russia will be boosting its oil production by 65,000 bpd in each in February and March.
Oil prices crossed the $60 per barrel threshold earlier this month, yet analysts have started to warn that the market may have gotten ahead of itself with the recent rally.
By Tsvetana Paraskova for Oilprice.com
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It is possible that Russia will call for an easing of the cuts in the next OPEC+ meeting since Russia’s economy can live with an oil price of $40 or less. It happens also that Russia believes that an oil price ranging $50-$60 will prevent a strong comeback of US shale oil production. Yet OPEC+ should stand firm on this and continue longer with its cuts.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London