Russia’s President Vladimir Putin has hinted that Russia may once again join OPEC in its efforts to stimulate oil prices even though Russia itself has no problem with current price levels.
“I want to stress that for the Russian budget, for our economy, the current oil prices level is acceptable,” Putin said during a meeting with energy industry representatives, as quoted by Reuters. “Our accumulated reserves, including the National Wealth Fund, are enough for ensuring a stable situation, the fulfilment of all budget and social liabilities, even under a possible deterioration of the global economic situation.”
Russia has been budgeting for lower prices for years now, after it suffered the fallout of the 2014 oil price collapse.
Yet the Russian president also recognised the need for steps to be taken to support prices, including, he said, “together with foreign partners,” as the partnership between Russia and OPEC has “proved to be an effective instrument to ensure long-term stability on global energy markets.”
At the same time, however, Putin noted there was no guarantee that deeper production cuts would improve demand for oil, which has been pummelled by the Chinese coronavirus outbreak and its international expansion.
The latest updates are discouraging: Italy had confirmed 1,694 cases as of the time of writing, which made it the country with the most cases outside of China. In the United States, there were 69 confirmed cases per data from the CDC as of Friday. Globally, the coronavirus, dubbed Covid-19, has spread to at least 60 countries with the number of infected at more than 87,100, although it could be a lot higher if mild cases that go unreported are included.
Amid the panic caused by the outbreak, even though experts note that the mortality rate could be as low as 1 percent, oil has been falling. At the time of writing, Brent crude was trading at $51.29 a barrel with West Texas Intermediate at $46.10 a barrel. Unless demand patterns change fast, especially in China, prices could drop further, endangering the economies of mot OPEC members.
By Irina Slav for Oilprice.com
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Russia’s economy can live with an oil price of $40 a barrel or less compared with $85 or even higher for OPEC members. Moreover, Russia has reserves estimated at more than $550 bn so it can afford to wait until the outbreak is contained before making an assessment as to whether oil prices will need new support with production cuts.
What President Putin is telling OPEC is that he is not against cuts as long as they work but they have no chance of success whilst the outbreak is raging.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London