The photo is sourced from RIA Novosti
“Some countries that have approached OPEC+ plus on these issues (boosting production), for example, the United States, for some reason are not urging their companies to boost production of shale oil, which has undergone substantial reductions over the past two years,” Novak told Russian RBK television.
“On the contrary, they are deliberately limiting their output. It would seem to me that that there are contradictions in their actions.”
Novak said OPEC+ countries paid no heed to these appeals “because we approach these issues in a systematic manner. We have a long-term view of how the situation develops on markets.
“We believe it is more correct in a medium-term perspective to set down how much we will raise production in the event of an increase in demand. Producing companies have to understand in advance how much investment to plan in order to provide for a production increase. We cannot constantly cover fluctuations in production, up and down,” Novak said.
OPEC+ believes that a possible release of strategic reserves by oil consuming countries will only have a short-term effect.
“Naturally, we closely monitor information of this sort. Plans to release parts of reserves onto markets have been announced by the United States, China, South Korea, Great Britain and India. In total, we are talking about 50-60 million barrels – and of that sum, the United States plans to release 30 million barrels in January-February 2022,” Novak told RBK.
“But world-wide consumption is about 36 billion barrels per year. Adding 50-60 million barrels on markets – this is not the sort of volume that will have a serious effect on the balance between supply and demand.”
Despite these contradictions, the price of oil this year and next will remain reasonable at a level of $65-80 a barrel,” Novak said. “I have deliberately chosen a wide range because we cannot rule out volatility on markets. In principle, our 2021 budget can be balanced at $43.30 a barrel and we have set down $44.20 for 2022. But a forecast for socio-economic development assumes higher prices.”
A high price level would secure support from a continued rise in demand, the deputy prime minister said.
“Markets were stable, continuously rising demand this year was met with a recovery in production levels. We expect that overall demand volumes in 2021 will rise by about 4.5-5 million bpd,” Novak said. “To ensure that production recovers to the level that was in place before restrictions were introduced in 2020, we expect a rise in demand next year of a further 4 million bpd.
“A serious rebound in the world economy took hold after last year’s pandemic (mainly because of lockdowns). Now we are observing that even the spread of the new Delta and Omicron Coronavirus variants do not have much of an effect on consumer mobility. Governments of different countries have adapted and are not closing down their countries as much. And of course, vaccinations are having an effect – in 195 countries, billions of doses of vaccines have been administered,” Novak told RBK.
Against a background of a forecast of this nature, Russia plans to maintain its level of oil production at 550-560 million tonnes per year up until 2030.
“Our companies are carrying out their long-term production plans based on a forecast of oil consumption on world markets and taking due account of reductions in the share of hydrocarbons. By 2030, our forecast is that production in Russia will remain at 550-600 tonnes,” he said.
“This is set down in the energy development strategy up until 2035. The distribution between the domestic market and exports will depend on the situation prevailing on markets.”
“Next year, consumption of about 100 million barrels a day is expected world-wide. I think that this will increase to 110 million barrels by 2030. The physical volumes of oil will increase, but its share in the energy balance will shrink.”
Commenting on fears expressed by Saudi Energy Minister Abdulaziz bin Salman that world-wide oil production could fall by 30 % by 2030 unless sufficient investments were made, Novak said: “Theoretically, this is feasible. But the market would then collapse. It would be impossible to reduce oil consumption by 30 % by 2030. How can you reduce production if there is demand?”