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Friday, October 21, 2016

The oil price will rise on Saturday, Russia will shed new dollar rain

On the question of whether, when, finally, more expensive oil, today the answer is simple. On Saturday, October 8. And “black gold” will continue to strengthen until October 13. The thing is that during this period a number of Ministers of oil-producing countries will hold an informal meeting in Istanbul. It will take part, and the Russian Minister of energy Alexander Novak. These days citizens and the exchange will be fed with news that the participants of the “summit” has practically agreed to cut daily production. Here’s a “verbal intervention” and play on the growth of hydrocarbon prices. And what will happen — this “MK” asked the leading experts.

photo: Gennady Cherkasov

— When the market will understand that there is no limit came out, and still persecute their prey, in spite of declarations and solemn undertakings, the oil will cease to rise and will go down in price. Supply and demand are the fundamental factors, despite all declarations, — said the “MK” RusEnegry partner Mikhail KRUTIKHIN.

— How important Russia’s role in negotiations with OPEC to limit oil production?

It is absolutely zero for several reasons. First, Russia mostly supplies oil under long-term contracts. And how it can reduce production, if there is a contract? Secondly, our oil companies operate independently of the will of the government and especially the Ministry of energy.

— Oil producer in the OPEC countries as independent from their governments?

— No, in most of these countries the main oil producers are fully subordinated to the political will of their rulers. From Venezuela to UAE from Nigeria to Indonesia oil usually produces one main state company, which is very easy to command. They are easy to negotiate. Not with us. OPEC can influence the production, our state — no. Well the most that it can do, is to gather in the Kremlin the leaders of our oil companies and ask them to reduce shipment in a matter of days.

— Because we have the most civilized and independent of the state of the market?

— Our market is one of the most dependent in the world, but not from the state but from the environment that does not allow you to manipulate the output. Our main production occurs in the North of Siberia, where if the hole shut, then there is thickening of oil and the blockage of the well. It should always work, and if a stop occurs, the well will be damaged, its repair is often impossible and it is necessary next to drill another.

Here, even on these technical reasons, Russia’s collusion with the oil producers of OPEC to limit production impossible. We can agree only that they will limit production, but we don’t.

— What will be the cost of oil, according to your prediction, given the fact that the agreement is impossible?

— Your newspaper — the first that I give my price forecast for next year. On average, with all the irregular up-and-down — $45.

— I agree with your assertion that meetings such as Istanbul, have a positive effect on the market — said the “MK” Director of energy development Fund Sergey PIKIN. — In the last year we have seen examples of such “verbal intervention” increased the price of oil up to 30%. Although in fact nobody agreed. And even if some solutions would record, it is unclear who and how to fulfill them. And then comes the understanding that to reduce production one is going. We are all on the level of historical record production and continue to renew month after month. Governments may issue a press release stating that they advised the companies to limit production, market will react is nice, but the company will not obey this recommendation. Therefore, I believe that in the foreseeable future, oil will be more expensive than $52 per barrel. We will reach this level, and then strike it and roll down all the way to $45.

The information that the oil reserves are exhausted, affects its price?

— No. They are exhausted not in this decade, and so far the market looks. As he looks at today and sees the excess of supply over demand.


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