Rehabilitation course: The Ministry of Energy of Russia expects an average oil price in 2020 above $ 30 per barrel

In 2020, the average oil price will be slightly above the level of $ 30 per barrel. On Tuesday, April 28, said the director of the oil and gas production and transportation department of the Ministry of Energy of Russia Alexander Gladkov.

“This year we expect the average price to be around $ 30 with something. That is, it will not cost $ 15 and will not cost $ 20. All our efforts are directed at this, ”Gladkov noted during an online conference at the Tyumen Oil and Gas Forum.

At the auction on Tuesday, commodity quotes show mixed dynamics. At the beginning of the session, American WTI crude oil declined by almost 20% to $ 10.1 per barrel, and the cost of the Brent benchmark fell by 6% to $ 18.7. However, in the afternoon, prices showed a slight increase and recovered to $ 13 and $ 20 per barrel, respectively.

According to RT leading analyst at Forex Optimum Ivan Kapustyansky, the observed uncertainty in the market is associated with concerns of global investors about overfilling of oil storage facilities. According to the expert, the current state of affairs runs the risk of turning back into a drop in US oil prices below zero.

“World oil storage facilities are already approximately 85% full. That is, the moment is approaching when the tanks are full. The largest US oil storage facility in Cushing, Oklahoma is almost completely full. This factor puts pressure primarily on WTI crude oil, because its main consumers are in the United States, ”the expert explained.

Recall, on April 20 and 21, the price of an exchange contract for the supply of WTI oil in May for the first time in history dropped to negative values. This was partly due to the fact that the reservoirs of the oil storage tanks were almost full, and the contract holders themselves were ready to pay for their refusal to accept raw materials.

Starting May 1, in order to combat an overabundance of oil in the global market of the country, the OPEC + participants will begin to reduce the production of crude by 9.7 million barrels per day. A decrease in production should begin in another 10 countries - exporters of raw materials, including the United States, Norway, Argentina and Canada. 

According to the head of the Ministry of Energy, Alexander Novak, the total volume of reduction in production by world hydrocarbon producers in the framework of the new OPEC ++ partnership may be 15-20 million barrels per day. At the same time, the global energy market will only be able to feel the impact of the deal in the second half of the year. Against this background, Alexander Novak does not expect a quick recovery in commodity prices.  

“In the near future, a significant increase in the cost of a barrel should not be expected due to the current overstocking of the market. Balancing may begin in the second half of the year along with the restoration of oil demand as the restrictions are lifted and reserves decrease due to the new OPEC ++ deal, ”Novak wrote in an article in the journal“ Energy Policy ”.

As an analyst with Finam Group of Companies Alexei Kalachev told RT, oil prices may begin to gradually stabilize amid partial weakening of quarantine measures in Europe. So, an improvement in the situation with COVID-19 is already observed in Germany, France, Italy, Spain. It is expected that by mid-May in these countries will be identified 97% of all cases. This is stated in a study at Singapore University of Technology and Design.

“When European countries lift restrictions, the demand for petroleum products will begin to recover. Under these conditions, the possibility of rising oil prices to $ 30 per barrel in May looks quite realistic. By the end of the year, we can expect the level of $ 40 per barrel, ”said Kalachev.

Price castling

It is curious that, against the backdrop of the uncertain dynamics of oil prices in recent weeks on April 24, the cost of raw materials of the Russian grade Urals exceeded the price of the reference brand Brent. This is stated in the report of the analytical agency Argus. Experts attribute the observed situation to the expected decline in Russian oil exports to Europe.  

“According to the May shipping program, Urals exports from Baltic ports should be reduced by almost 40% compared to April, to the lowest level since December 2014 - 997 thousand barrels per day (4.3 million tons). Deliveries from Russia are declining due to the entry into force of a new OPEC + agreement on production restrictions, ”the agency said.

According to Alexey Kalachev, traditionally Russian Urals oil is cheaper than Brent. Nevertheless, under current conditions, Urals is in greater demand from European processing plants (refineries) than the North Sea raw materials. In addition, as the analyst noted, at present, Russia remains the only reliable supplier of heavy oil. 

“For the normal operation of the refinery, oil of certain characteristics is needed, and reconfiguring the equipment to another grade is a long process. Unlike Brent, Urals is a heavy, sulphurous oil. Its analogues are mined only in Iran and Venezuela, but deliveries from there are not available due to sanctions, ”the expert noted.