There is a risk that oil prices could drop to as low as $30 a barrel because OPEC and its Russia-led allies could produce more oil by the end of the year than market demand, said Russia’s Energy Minister Alexander Novak.
Earlier, Russian Finance Minister Anton Siluanov said that the price of oil could drop to $30 a barrel if OPEC and its partners fail to agree on extending the production cuts that currently expire at the end of June.
Asked to comment on Siluanov’s words, Novak told reporters that such a scenario of a sharp drop in prices is not to be ruled out. Much will depend on the situation on the oil market in the second half of this year in the third quarter on trade wars, as well as on sanctions, Novak said.
“Indeed, there are big risks of over-production. But on the whole … we need to analyze deeper and look at how the events will develop in June in order to take a balanced decision at the joint OPEC+ meeting in July,” Reuters quoted Novak as saying. Novak was speaking at a joint briefing with Saudi Energy Minister Khalid al-Falih, who was in Russia for meetings with Novak and Vladimir Putin, weeks before OPEC and its Russia-led partners are set to decide how to proceed with their oil market management policies in place since 2017.
OPEC is close to reaching an agreement to extend the production cut deal beyond June, al-Falih said on Friday from Russia, adding that the sticking point is now to calibrate the cuts with the non-OPEC group of producers led by Moscow.
Russia doesn’t need oil prices to be too high and sees the $60-65 a barrel price—the price at which Brent Crude currently trades—as “quite satisfactory,” Putin said last week.
But Saudi Arabia needs oil at $85 to balance its budget, so the leaders of the two OPEC+ groups are (again) at odds over what they see as a ‘fair price’ for oil.
Referring to the OPEC+ deal after the talks he held with Russia’s top officials, Saudi Arabia’s al-Falih told Russian news agency TASS in an interview published on Monday that “I am fairly confident that from the OPEC side almost everyone agrees that we need to extend the Declaration of Cooperation,” adding that “So, I think the remaining country to jump onboard now is Russia.”