If US states ease national lockdowns and oil demand improves, oil prices could recover to $40-$45 a barrel by the end of this year, the chief executive of Gazprom Neft told Russian business daily Kommersant in an interview.
However, Alexander Dyukov said this was an optimistic scenario that envisaged a relatively quick recovery of economic activity during the second half of the year. Right now, he said, it is not easy to predict where oil demand will go and expecting a sharp rise in prices would be unrealistic.
When asked about the OPEC+ deal that was this time joined by other producers, including Brazil, Norway, and the United States, Dyukov said it was too early to tell whether it was a success. Dyukov noted that a production cut is necessary for all producers.
OPEC+ agreed this weekend to remove 9.7 million bpd of oil from global markets, beginning in May. The cuts will be in effect for two months, after which they would relax to 7.7 million bpd until the end of 2020. The cuts will then drop to 5.8 million bpd, which will remain in effect until April 2022.
Russia's portion of the total OPEC+ cuts is 18 percent, Dyukov said, adding that this was the same portion that the country had in the first OPEC+ deal. With the new non-OPEC participants are factored in, Russia's share of the total cuts falls to less than 15 percent.
Premium: U.S. Oil Production Has Already Peaked
Oil prices reacted weakly to the news about the OPEC+ deal and the news that G20 oil producers will also contribute to the production cuts. After an initial spike, they trimmed their gains. At the time of writing, Brent crude was trading at $32.22 a barrel with West Texas Intermediate at $22.72 a barrel, suggesting that market players are still concerned about the demand side of the oil equation.
Speaking of demand, Gazprom Neft's Dyukov told Kommersant it was time to change the way the oil market is regulated. "Over the long term," he said, "it is important to move away from targeting the five-year supply average to targeting the rise in oil demand."
Simply put, according to the executive, OPEC+ can choose part of the global oil demand, say 50 percent, and plan its production in such a way as to satisfy this portion. This, Dyukov says, will, on the one hand, prevent the squeezing out of other oil market players and, on the other, demotivate investments in costly new production projects. In the end, this would allow it to keep prices at an acceptable level, which Duykov sees at $50 a barrel.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More