Baku, Azerbaijan, Jan. 25
By Elena Kosolapova - Trend:
Oil-producing countries and companies will strive to maintain the production level even with very low oil prices in order not to lose their market share, senior fellow in Energy Policy at the Center for Eastern Studies in Warsaw, Agata Loskot-Strachota believes.
"There is this perception of new supply going onstream (Iran crude for example) so I guess there might be also fear that limiting production, does not affect price level & just makes space for the newcomers," Loskot-Strachota told Trend.
Earlier Reuters reported that some of the world's biggest oil producers Venezuela, Colombia, and Ecuador are not even covering production costs with the current crude price.
Loskot-Strachota said that current low oil price is indeed not covering costs of production in many countries and so it affects economics of oil sales but also, and possibly to bigger extend, investments in exploration and new oil fields development. However she assumes that as far as the working oil wells are concerned they will not stop working for at least as long as the operational costs are covered (which is just part of the overall production cost), and sometimes even below that level.
"Everyone knows that oil prices fluctuate and expects they will start rising... But certainly operational costs present a specific red line in all these calculations," she said.
Speaking about the oil prices, Loskot-Strachota said that increase in their level could be provoked by decreased supply due to any supply shock or even expectation of such a shock.
However she noted that for example the recent quite serious tensions between Iran and Saudi Arabia did not affect prices seriously. On the other hand, she believes that sharp increase in the demand for oil could also affect prices.
On Jan. 25 March futures for Brent oil hit $33.2 per barrel.
Edited by SI
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