Russia said it could take longer than it had previously forecast for the global oil market to reach a balance between demand and supply after crude prices plunged to $30 per barrel. The country’s energy minister, who said in December that the global oil market could return to a balance by the end of 2016, as long as producers do not raise output from current levels, said on Thursday this may not now happen until early 2017.
Oil prices have fallen by more than 70 percent over the last 18 months, mainly as a result of oversupply. This presents a challenge for Russia, where oil and gas sales account for more than half of its budget revenues. “It is possible that the period of balance of demand and supply has stretched… There are some estimates that it will happen in early 2017,” Novak said on the sidelines of a conference in Moscow.
Russia, a global leader in production, has been pumping oil at a post Soviet record-high of more than 10.8 million barrels per day. Novak said that oil output and exports are likely to rise even further this year, while domestic producers – buoyed by a weaker rouble and subsequent operating cost declines – have yet to start cutting their investment programmes.
On Wednesday, Deputy Finance Minister Maxim Oreshkin said persistently low oil prices may result in the closure of some crude producing assets in Russia Earlier on Thursday, Novak’s deputy, Kirill Molodtsov, said that Russian energy ministry officials may meet OPEC before March. It was not immediately clear at what level this possible meeting would take place.
Russia has so far refused to give in to pressure from some OPEC countries to cut oil production to support oil prices, arguing its harsh climate does not allow for a quick restart of wells once they are shut.