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Expert: Russia, Saudi Arabia cannot allow oil prices to remain at current level

Economy Materials 9 April 2020 15:43 (UTC +04:00)
Russia, Saudi Arabia and the US cannot allow oil prices to remain at the current level for a long time, Gulmira Rzayeva, Azerbaijani expert, researcher at the Oxford Institute for Energy Studies, said.
Expert: Russia, Saudi Arabia cannot allow oil prices to remain at current level

BAKU, Azerbaijan, April 9

By Nargiz Ismayilova - Trend:

Russia, Saudi Arabia and the US cannot allow oil prices to remain at the current level for a long time, Gulmira Rzayeva, Azerbaijani expert, researcher at the Oxford Institute for Energy Studies, told Trend.

Rzayeva, who is also the director of Eurasia Analytics consulting company, was commenting on the upcoming OPEC meeting.

“Presently, it will be beneficial for all parties to reach an agreement by reducing not only oil production but also oil export,” the expert said. “Saudi Arabia insists on the April level of production. It is possible that it may take on additional voluntary commitments on oil reduction.”

“Russia in this situation cannot but make concessions,” Rzayeva added. “Perhaps at the ministerial meeting of OPEC and non-OPEC countries, Russia will be encouraged by lifting any sanctions if it agrees to reduce export. The US will not formally make concessions, as this will result in job losses. The US will have to restructure the shale industry.”

“Donald Trump has already stated that they have a natural decline - this is a 20-30 percent reduction,” the expert said. “They will not deliberately agree to a deeper reduction. Moreover, Brazil, the United Kingdom, Norway, Canada and Mexico are likely to try not to take formal commitments on oil reduction.”

“Perhaps, Canada and Brazil will voice the voluntary intentions on oil reduction which were previously announced,” Rzayeva added. “There is a natural decline in Mexico and Norway. They just may make the statements about a historical decline in oil production."

“As for the UK, the country is likely to announce about reduction in oil production of its companies that operate in Texas,” the expert said. “After reaching an agreement, oil prices will go up and stabilize at a level that will dictate the ratio of supply and demand.”

“Moreover, the most affected countries as a result of low oil prices are Russia, Saudi Arabia and the US,” Rzayeva said. “These countries are most interested in reduction of oil production to stabilize the prices.”

“Even if the reduction of oil production reaches up to about 15 million barrels daily, this will not affect the market greatly as the demand fell by 26 million barrels per day,” Rzayeva said. “Such a reduction will affect the prices insignificantly and not for a long period. Prices will return to such a level, which will be regulated by supply and demand in the market.”

“Russia is concerned about the US growing share in the oil market,” Rzayeva added. “Russia committed to reduce oil production as part of the OPEC + deal, but actually did not reduce anything. The commitments on the reduction of oil production were fulfilled by Saudi Arabia and partly by other countries.”

“But, if Russia still has to reduce oil production, perhaps by a million barrels, or even a little more, then it will lose its share in the oil market, which will become an unfavorable phenomenon for the country,” the expert added. In any case, the market has already sunk and all its participants will suffer from this.”

"The parties cannot make certain concessions on the reduction of oil production,” the expert said. “I think this will happen anyway. I doubt that an agreement will be reached."

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