Hope on demand
Coordinated production cuts by oil producers by 1 million barrels. a day would sharply reduce the uncertainty in the market. This opinion was expressed during the International Petroleum Week in London, the President of “Rosneft” Igor Sechin, quoted by “Interfax”.
But after the speech, answering the journalists ‘ question whether Russia is ready to reduce production in collaboration with other producers, Rosneft President answered the question: “do You know who is going to cut production?”
He predicted that the imbalance of supply and demand for oil may decline to the end of 2016 by end of 2017 potential deficit of up to 0.5 million barrels. a day. “The process of balancing market can significantly slow down the impact of two key factors. On the one hand, it is possible further to increase the supply of OPEC oil, and additional oil supplies from the U.S. if you enter a drilled, but not completed the hydraulic fracturing of wells, which we estimated at 0.5 million barrels. in the day,” he explained.
According to him, the annual decline in average daily production in the world is estimated at 3 million barrels. a day. Currently, an estimated Sechin, the excess supply of oil over demand is between 1.5 and 1.7 million barrels. a day. However the market will inevitably stabilize, there are good prospects for growth, he predicts. The demand for liquid hydrocarbons will grow annually by 1.3% and 1.5%, Sechin quoted by TASS.
“The combination of favorable conditions, including a clear market signals about the need for additional volumes of deliveries of production in the country in General and in the company “Rosneft” can grow. We’ll be ready for this development both technologically, organizational and economically,” the report said Sechin, who he submitted in London (have a copy).
Sechin once again described the cost of oil production Rosneft as one of the lowest in the world: “On the cost of production at the wellhead at one of the lowest levels — $2.7 per barrel”. In September 2015 he talked about $4 per barrel at the rate of 66.6 rubles per dollar (now about 80 rubles).
Other forecasts of oil prices
The Ministry of Finance — $40
Finance Minister Anton Siluanov in early January said that he considered possible to Refine the forecast average oil price in 2016 to $40 per barrel (now it is budgeted for $50 per barrel). This value can be incorporated in the budget refinements, said Siluanov.
The Ministry of economic development — $25
The Minister of economic development Alexei Ulyukayev January 18, talked about a possible decline in Russia’s GDP in 2016 under different scenarios average annual oil prices. According to him, at a cost of $40 per barrel decline in Russia’s GDP is less than 1%, and in the case of a stress scenario with $25 per barrel — the economy’s decline will accelerate, but will not exceed last year’s figure by 3.9%.
The Ministry of energy — $20
“Today, when we have $30 per barrel of Brent, is not a fantastic stress test and $25, and $20 [per barrel],” said energy Minister Alexander Novak in an interview in mid-January.
“Gazprom” — $20
In “Gazprom” began to test versions of the company’s budget with falling oil prices to levels $25 and $20 per barrel. This was announced on 1 February the first Deputy head of the financial Department of the company Igor Shatalov at a meeting with investors in new York. In the budget “Gazprom” for 2016 based on the price of $50 per barrel.
Prices are falling because of speculators
The President of “Rosneft” considers that the oil price is pushed down, the speculators, the financial market participants. “I must admit that we underestimated the fact that financial market participants do not know restrictions in their purely financial goals and we are ready to test any price levels — $27 in January, for example, and up to $10 per barrel”, — he said.
On Wednesday, the Brent crude is trading at $30,8 per barrel. Sechin called speculators “beneficiaries of the crisis.” According to him, world oil producers in 2015 was divided. “Who was the main beneficiary of the current crisis? Obviously, this is not the consumers, as the current prices of petroleum products decreased, on average, only less than 20%, and the financial players that have not yet redirected the freed up as a result of falling investment in the industry $250-300 billion in projects in other sectors of the economy”, quoted by “RIA Novosti”.
In his report, Sechin mentioned that the long-term influence of speculators on the price of oil declines. “The role of the major players in the global oil production will largely be determined by reliable, efficient and large-scale resource base, and the speculative, short-term factors will fade into the background,” he said.
The President of “Rosneft” expects that over time oil prices will rise above $50-55 per barrel. “This can be seen from the analysis of official U.S. energy information Administration, the Ministry of energy, which suggests that in the future, in all realistic scenarios, the production of shale oil in the U.S. in the future will decrease, despite the expected growth of prices”, — said in his report
In mid-January 2016, Russian Minister of energy Alexander Novak in an interview said that the probability of a price decrease to $10 small. “We are not considering such options. But I say again that a shortterm bottom might be any”, he said, predicting that the critical situation for the Russian budget comes with an average annual price of oil at $5-15 per barrel, which is an estimate of the cost of oil production the major players in the Russian market. The Minister asked the oil industry to calculate the stress scenario at a price of $30 per barrel.
In the draft minutes of the meeting Novak on 27 January (has a copy) contains instructions to send to the Ministry before March 1, a list of projects to be suspended or delayed when the level of oil prices at $30 and below. The outcome of this meeting was also expressed the willingness to hold an extraordinary meeting of OPEC in February this year (members of OPEC did not reflect the meeting). According to sources in the Ministry of energy, in the next two weeks in the chart Novak and his deputies no travel for meetings with OPEC or plans for such talks in Moscow.