Coronavirus: Russian oil sector awaits economic recovery

Audio 01:39

Russian Minister of Energy Alexander Novak (illustrative image). REUTERS / Sergei Karpukhin

By: Etienne Bouche

It is this Friday that the OPEC + petroleum agreement comes into force, an agreement which provides for a historic reduction in production until April 2022. This reduction, bitterly negotiated, has put an end to the confrontation between Russia and Saudi Arabia. But the health of the sector remains a serious source of concern for Moscow.


Under the OPEC + agreement, Russian oil production will decrease by around 10% compared to the previous year. This was stated on Wednesday by the Minister of Energy, Alexandre Novak, during a videoconference with Vladimir Putin. In 2019, the country produced more than 560 million tonnes.

In an interview with the Gazeta online newspaper , Alexandre Novak estimates that April will probably remain the most difficult in the history of the oil industry. For Russia, very dependent on its crude oil exports, the collapse in demand promises severe economic consequences: in the space of a few weeks, the Central Bank radically revised its forecasts; she said GDP could drop 6% this year. The average price of a barrel of “Urals” oil should reach 27 dollars in 2020, well below budget forecasts. But in this crisis, Russia is not the poorest: the country has little debt and benefits from significant financial reserves. In recent years, Moscow has sought to limit its vulnerability to external shocks.

For Russian tankers, concrete technical questions arise such as the conditions for shutting down wells and storing production. The Minister of Energy evokes in any case the beginnings of a recovery. In recent days, oil prices have picked up a few colors and the Russian currency, the ruble, has stabilized. In a context where the world is considering a gradual exit from the containment regime, Russia expects a rapid resumption of activity in order to support this crucial sector for its economy.

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