The efforts of OPEC and its Russia-led non-OPEC allies to cut production further will be positive for oil prices, which will stay in the US$55-US$65 per barrel range in the first quarter, Alexander Dyukov, CEO at Russian oil producer Gazprom Neft, said on Tuesday.
Oil prices will be stable within that range, Dyukov told reporters on the sidelines of an event in Moscow, as carried by Russian news agency TASS.
Gazprom Neft, the oil arm of gas giant Gazprom, has budgeted an oil price at US$57 a barrel in its budget for 2020, Dyukov said.
Russian oil companies have long balked at continued production cuts, arguing that the cuts give more market share to U.S. shale and hinder Russian firms’ production expansion plans.
At last week’s OPEC+ meeting in Vienna, Russia agreed to deepen its own cuts by 70,000 barrels per day (bpd) in the first quarter, but it managed to have its condensate production out of the equation, thus showing that it actually complies with the cuts.
At the OPEC+ meeting, OPEC and its partners decided to deepen the cuts by 500,000 bpd in the first quarter, when demand is expected at its weakest for next year. This brings total production reductions at 1.7 million bpd—that is if rogue members fall in line with their quotas.
Considering the pledge from OPEC’s largest producer and de facto leader, Saudi Arabia, that it would continue to significantly overcomply with its share of the cuts, the total cuts could be as high as 2.1 million bpd, OPEC said.
“We concluded that in a period of lower demand it is reasonable to further cut production, so our total cut deepens to 300,000 bpd,” Russian Energy Minister Alexander Novak said at the meeting last week.
The Russian minister also noted the slowdown in U.S. shale growth, saying that the partners are monitoring the situation with the funding and finances of the U.S. shale patch.
By Tsvetana Paraskova for Oilprice.com
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