The OPEC+ alliance looks to keep oil prices in the range between $65 and $75 per barrel, and this is a comfortable price for consumers, Vagit Alekperov, president and CEO at Russia’s second-largest producer, Lukoil, told Russian newspaper Kommersant.
Brent Crude prices have not fallen below $65 a barrel since April. The price of Brent briefly exceeded the $75 per barrel mark in early July, before pulling back in August amid concerns about the pace of global oil demand growth with surging COVID cases in many major economies.
Early on Tuesday, Brent was trading slightly down at $72 per barrel.
“I think that the OPEC+ alliance was created to last forever, not for just some period of time,” Alekperov said in an interview with the Russian business outlet published on Tuesday.
It is just that the OPEC+ oil market-managing policies would be different in the future depending on the situation, the executive added.
“I wouldn’t want to see oil above $100 a barrel again—this would lead to more investment in inefficient projects yielding low profits, and again lead to a collapse on the market,” Alekperov said.
Russia continues to be a priority in Lukoil’s investment and drilling strategy, the executive told Kommersant, asked if investments in projects outside Russia have changed the focus for the company.
Lukoil plans to invest 80 percent of its capital budget in Russia, and the rest in projects outside Russia, in regions it considers of strategic interest. These are the Caspian region outside Russia, West Africa, the Middle East, and Mexico, Alekperov said.
Because of the pandemic last year, Lukoil boosted its investments in Russia by 14 percent and cut investments abroad. Russia received 84 percent of the company’s capital budget while foreign projects got 16 percent, the manager added.
Lukoil has the potential to increase its oil production further, once OPEC+ unwinds all the cuts, Alekperov said.
By Tsvetana Paraskova for Oilprice.com
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Moreover, the majority of Saudi-led OPEC members need an oil price higher than $80 to balance their budgets.
Still, OPEC+ which is the most influential player in the global oil market will agree policies aimed at maintaining a balance between supply and demand so as not to tip the market into a deficit or a glut.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London