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Experts: American "market animals" will recover at $40 per barrel

Professor Fedor Voitolovsky, director of IMEMO RAS, believes that the price of $40 per barrel of oil will allow American shale producers, which he calls "market animals", to recover.

"We have to understand that the American oil industry is regulated differently than the Russian one. It's still more of a 'market animal' ... The weighted average price of $40 per barrel will already allow  some of the U.S. producers, including shale oil producers to reach a sufficiently high level of profitability," Voitolovsky said during his speech at the online session of Primakov Readings organised by IMEMO RAS and Interfax News Agency with the support of the Global Energy Association.

Voitolovsky answered the question of Sophia Morgan, Head of the International Cooperation of the Global Energy Association.

 

According to the academician, the drop of the market price was very important for American producers. "Now that the American producers have reduced production, including shale oil, and the price has started to grow, there are opportunities to restore some of the shale oil production," Voitolovskiy said.

He drew attention to the fact that the fall in oil prices in the U.S. led to a halt in production and at the same time to a change in the forms of ownership. A large number of small companies went bankrupt, and they were eventually bought up by large U.S. producers, who could hedge their risks. 

"The U.S. strategic vector in terms of the oil and gas industry, which has been consistently pursued by the Barack Obama administration and is now followed by the Donald Trump administration, has remained the same. Under the Obama administration conditions were created for the shale revolution, the Trump administration also creates conditions to stimulate the presence in major regional gas markets and to create additional external factors for the development of the U.S. oil and gas industry," the expert said.

"The U.S. is actively seeking to take a leading position both on the global oil market and on the regional level, primarily in European and Asia-Pacific gas markets, with LNG in mind. And this vector remains unambiguous. The same is true for the export of oil products, although there was a certain reduction last year," Voitolovsky concluded.

In turn, the president of IMEMO RAS, academician Alexander Dynkin, answering the same question of the representative of the Global Energy Assocition, noted that the U.S. actions in this area will determine the market. "As soon as the market conditions and the demand for hydrocarbons recovers… Of course, you are absolutely right that shale deposits are easier to run than our oil wells. There is no big mystery here, the market demand will determine the nature of this recovery," Dynkin said.

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