OPEC didn't want to make the first step
Baku, Azerbaijan, Dec. 19
British radio station Share Radio had a Q&A with oil markets expert, Trend Agency's deputy director, Vagif Sharifov, about the situation in the oil market and its impact on the Russian economy.
How are the oil markets doing this morning?
The price of OPEC basket stood this morning at $55 per barrel. WTI for the January futures is $56 and Brent futures for the February is $60. If we compare the spot price for "Brent dated" in December with that of November we can see that figures have fallen by 20 percent. But comparing this month with December 2013, we see the oil price has fallen by twice as much. The OPEC position is still as the same as it was in November.
They are not going to reduce oil production to support prices and Saudis say there is no politics involved in the issue. Their oil minister said this week that OPEC could not cut output without the support of other big producers and attempts to get them on board hasn't worked. So it actually means OPEC didn't want to cut the production on its own and didn't want to be, you know, the pioneer in making the first step.
What impact, in your opinion, President Vladimir Putin's speech had?
Despite the fact that Russia keeps some 15 percent of world oil production, the world is now producing more oil than consumers need. OPEC alone produces at least 30 million barrels of oil per day. Usually the oil market has strong immediate reaction if some big oil producing country says it is going to cut or increase supplies. But now what we have heard is only the reaction of Russia itself to the declining oil market.
Oil companies in Russia - any chance for them to come out of the situation?
The oil prices began to fall in the autumn of this year, when the demand actually is always starting to grow (in the middle of September as usual). The OPEC's position in that case is very strange - to keep oil production on a high level despite the falling oil prices on a daily basis.
There is a chance for Russia's big oil companies. It is now called "to be flexible". What it actually means is to cut the staff by some 15-20 percent and therefore to try to cut the costs. For example, Russia's gas giant Gazprom official told reporters that it would be wrong to exclude the possibility of optimizing the organizational structure in the future.
Vagif Sharifov, is an oil markets expert, development director at Trend Agency. Follow him on Twitter:@VagifSharifov