"One can forget about oil at $100 per barrel"
Russia’s Energy Minister Alexander Novak expressed an opinion that everyone has forgotten about oil at $100 per barrel.
"We live based on mid-term oil price assumptions of $50 ... Our budget is based in 2019 on oil prices of $43-$45 per barrel," Reuters cited him as saying.
The Russian minister explained that in the longer term, oil would stay near $50 a barrel because booming production in the United States and elsewhere was offsetting the loss of Iranian and Venezuelan output and events such as last month’s attacks on Saudi oil facilities.
According to the forecast by international rating agency Fitch, the price of oil in 2019 will be $65 per barrel.
A senior analyst of 'Uralsib', Alexei Kokin, speaking to Vestnik Kavkaza, noted that since 2014, when oil dropped below the threshold of $100 per barrel for the first time, the assessment of the oil output potential in the United States has changed. "Oil production in the United States has been repeatedly overestimated in the direction of increase since then. The total production capacity in some OPEC countries, including Saudi Arabia, has decreased to a lesser extent, all this time there has been stable production in Russia as well," he recalled.
"In general, on the supply side, the current situation is better than it was five years ago, thanks to the United States, Russia, Saudi Arabia - hence the assessment of the fair threshold price of $50 per barrel. Novak's thesis, rather, means that one should not expect explosive growth of prices and returning to the level of $100 per barrel, but average and the expected levels may fluctuate - perhaps it’s right to talk about the fair price of not $50, but $55 per barrel," Alexei Kokin added.
Deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, noted that since 2014, there has been a radical decrease in the cost of shale oil production in the United States. "And it was a fundamental change for the market. The average cost of all U.S. shale projects in five years declined from $85 per barrel to $43-46 per barrel, there were drops to $30 per barrel," he said.
"By the way, in general, the cost of oil production has decreased due to technological development and organizational innovations. Naturally, there are a number of projects that still require very high prices. For example, the development of our Arctic shelf requires at least $80 per barrel, better $95, in order to make it was economically attractive for companies. There are similar projects in Canada and Venezuela. But the average cost is reduced," Belogoryev added.
"In addition, when we talk about oil prices, we talk primarily about futures contract indices, which reflect the state of the financial market, affecting investor sentiment. If there aren’t any sharp geopolitical changes, for example, the war between Saudi Arabia and Iran, average annual prices are unlikely to exceed $70 per barrel, but rather will tend to $50," the expert concluded.