Russia: Global Shale Output Decline Will Stabilize Oil Market

Russia: Global Shale Output Decline Will Stabilize Oil Market
Russia's energy minister expects that cuts in global shale oil production will help stabilize the oil market.


MOSCOW, Sept 10 (Reuters) - Russia's energy minister expects that cuts in global shale oil production, which has been hard hit by lower oil prices, will help stabilize the fragile oil market.

Alexander Novak also reaffirmed that Russia, one of the world's top oil producers, would not cut its own production as it would lead only to a short-term recovery with risks of subsequent slumps in prices.

The Organization of the Petroleum Exporting Countries, which accounts for around a third of global oil output, changed its policy in 2014 to defend market share and discourage competing supply sources, rather than cut its own output in the face of lower prices.

"Shale oil has been leaving the market bit by bit. This is a good and positive signal, which allows one to say that the market will stabilize in mid-term," Novak told Rossiya-24 TV in an interview aired on Thursday.

After three years, in which U.S. production grew on average by more than 1 million barrels per day (bpd) annually, U.S. output is expected to expand by just 650,000 bpd on average in 2015 and then shrink by 400,000 bpd in 2016, according to the U.S. Energy Information Administration.

The price of oil, Russia's chief export commodity, has more than halved since its peak in June 2014, mainly due to global oversupply and weaker economic growth in China, the world's top energy consumer.

Novak said the cost of shale oil production - between $45 and $60 per barrel - is seen as a benchmark for oil prices. He expects prices to be between $50 and $60 per barrel on average this year - in line with Russia's budget forecasts.

Earlier this week he said that Russia, which has been producing oil at a post-Soviet high of around 10.7 million bpd, may increase output by around 1 percent this year.

The minister dismissed the idea that deliberate cuts in oil production would help support the oil market.

"We have always said that an artificial decrease in oil production would lead only to a short-term price increase. In turn, a higher price would allow to increase supply on the market thanks to ineffective projects becoming profitable," Novak said.

"And again the next circle emerges: oversupply will lead to a substantial price drop, which, probably, could be even deeper if this is allowed to happen."

(Reporting by Vladimir Soldatkin; Editing by Alexander Winning and Susan Thomas)

Copyright 2016 Thomson Reuters. Click for Restrictions.


Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
John Couch | Sep. 10, 2015
With respect to Mr Novak, I disagree. The cuts have already been made into the US shale drillers market, and the production figures he quotes support that. Should Russia and other major worldwide producers even hint at a production decrease, they could capitalize on at least 10% increase in price based on speculation. The lag time required for the re-introduction of shale oil back into the market would balance the price as they increase production to present levels (should they even cut it all.)


Our Privacy Pledge

Most Popular Articles

From the Career Center
Jobs that may interest you
Technical Sales- Decontamination/Chemical Cleaning Services
Expertise: Sales
Location: Baton Rouge, LA
Account Manager - Western US - Vapor Control & Degassing
Expertise: Sales
Location: Long Beach, CA
Sales Manager - Vapor Control/Degassing Services
Expertise: Sales
Location: Houston, TX
search for more jobs

Brent Crude Oil : $51.78/BBL 0.77%
Light Crude Oil : $50.85/BBL 0.83%
Natural Gas : $2.99/MMBtu 4.77%
Updated in last 24 hours