Oil prices may exceed $30 per barrel in summer due to demand recovery
Oil prices may exceed $30 per barrel in the summer due to a recovery in demand, but sharp growth should not be expected, Head of Gazprom Neft Alexander Dyukov said in an interview with Channel One.
“The market believed in the seriousness of intentions of the parties to the OPEC deal. Indeed, we can say that the deal has already begun working towards decline. But at the same time, of course, we should not expect a sharp increase in oil prices in May. I hope that this summer, with restoration of oil demand, prices will surpass $30 per barrel, and by the end of the year they will approach $40 per barrel,” he said.
Dyukov added that the deal to reduce production will give Russia advantages in the form of reserve capacities, which will strengthen the country’s position in the negotiations in the future.
“[By reducing oil production] we are creating capacities that can be needed when demand for the such additional volumes of oil appears. And, of course, creating additional reserve capacities strengthens our negotiating positions, as we know that they are being determined within OPEC+, by production volumes first, and by reserve capacities available to oil producing countries second,” he said.
According to Dyukov, reducing production in such large volumes is not an easy task, but it can be done.
OPEC+ countries at an emergency meeting on April 12 were able to finalize the deal to reduce production in May – June, negotiations on which began on April 9. The final quota for reducing production over two months will not be 10 mln bpd, but 9.7 mln bpd, since Mexico has assumed a lower quota than expected. Russia and Saudi Arabia, under the terms of the agreements, will reduce oil production by equal shares – 2.5 mln bpd from the base level of 11 mln bpd.
The agreement will be in effect for two years, but from July to December 2020, 7.7 mln bpd is already falling under the alliance’s cuts, and from January 2021 to the end of April 2022 – 5.8 mln bpd. The deal’s parameters may be revised in December 2021.