A decline in crude oil supply after 2020 could lead to higher prices, the Russian Energy Ministry said in a draft energy strategy document.
The same document, however, also saw a bleaker future for oil demand, forecasting that it will slow in the coming years and maybe peak before 2030, TASS reported, quoting the draft strategy.
“Demand for oil products will be formed under the influence of growing consumption in the transport sector simultaneously with decreasing demand in the household and commercial sectors, as well as in the electric power industry," the draft also said.
Even if prices fall a lot further, however, Russia will have commercially viable reserve sufficient for three years, in a scenario with oil prices at $25-30 per barrel. That’s what Finance Minister Anton Siluanov said earlier this week, suggesting there was such a possibility.
"Since oil prices are unlikely to increase dramatically, then if the restrictions on oil production are not reached with OPEC countries, there are, of course, risks that prices may drop to $25-30 per barrel,” Siluanov told media. “Our budget policy allows us to circumvent these risks for up to three years, fulfilling all our obligations with accumulated reserves,” he added.
Russia is notoriously wary of oil price fluctuations and has been making its annual budgets based on substantially lower than actual prices. The base price in the 2019 budget, for example, was about $41.60 per barrel.
Meanwhile, wherever prices go, Russia’s Energy Ministry expects the country’s total output to average around and slightly above 11.2 million bpd until 2024, according to the draft strategy document. That’s the same average output level that Russia recorded last year. The expectation suggests that Moscow does not expect any further deepening of the production cuts it agreed to implement alongside its OPEC partners to stabilize prices.
By Irina Slav for Oilprice.com
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The glut has been big enough to undermine OPEC+ production cuts, nullify the impact of geopolitics and also outages on oil prices and also absorb the loss of half of Saudi Arabia’s oil production in the aftermath of the attacks on its oil infrastructure.
With a de-escalation of the trade war hopefully continuing into 2020, one would logically expect the glut to start declining thus stimulating the global oil demand and therefore prices in 2020.
However, the Russian Energy Ministry in a draft energy strategy document seems to be projecting a peak oil demand by 2030.
May be the Russian Energy Ministry should heed four pivotal principles that will govern the global energy scene in the 21st century and far beyond. The first principle is that there will be no post-oil era throughout the 21st century and far beyond. The second principle is that that there will be no peak oil demand either. The third principle is that an imminent energy transition from hydrocarbon to renewables is an illusion. And the fourth principle is that oil and gas will remain the core business of the global oil industry well into the future.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London