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Russia’s energy chief blames US trade war for current oil prices

July 13, 13:12 UTC+3

Russia reduces crude oil production by 100,000 barrels per day in July, the energy minister says

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© AP Photo/Thibault Camus

MOSCOW, July 13. /TASS/. The current level of oil prices stems particularly from the US trade war, Russia’s Energy Minister Alexander Novak said Friday.

"Those (oil price decline - TASS) are negative signals for the global economy. Crude prices are volatile and respond to existing general signals. The current prices reflect trade wars statements as well," he explained.

A sharp drop in crude prices started on July 11, as the price of Brent crude oil decreased by $4 on the day to $73 per barrel.

Oil production

Russia restored oil production by 80% in July against the reduction volume within the OPEC+ agreement, he added. 

"Following the decision on increasing production, in July we have already restored reduction by approximately 2/3 or even by 80%," Novak said.

Russia reduces crude oil production by 100,000 barrels per day in July, versus October 2016, he said. "In June, the reduction was 180,000 (barrels per day) instead of 300,000. As for July, it is still early to speak about monthly indicators, though we assume that the total reduction will amount to roughly 200,000 versus the limit. Around 100,000 (barrels per day) will remain compared with October 2016," he said.

OPEC+ deal

Russia expects the effect of OPEC+ deal to amount to 2.5 trillion rubles ($40 bln) in 2018, he said. 

"With (oil) prices of $70 (per barrel - TASS) the effect will amount to 2.5 trillion (rubles)," he said, adding that with average annual oil price of $75 per barrel the effect may exceed 3 trillion rubles ($48 bln).

According to Novak, extra revenues from the deal amounted to 1.7 trillion rubles ($27 bln) in 2016-2017 due to the oil price increase.

OPEC+ will be able to make decisions on regulation of the oil market after 2018, he added. The OPEC+ agreement fulfilled the task of balancing the market, oil surplus left, the Minister said.

"As for continuing this work (to regulate after 2018 - TASS), we will consider its expediency. The mechanism was effective. The countries want to continue interaction, make decisions on oil production if necessary," he said.

OPEC+ states may raise crude production by over 1 mln barrels per day if needed, he said. "I do not rule out that if (the market - TASS) needs more than 1 mln barrels let’s say, we (OPEC+ agreement participating countries - TASS) will be able to discuss it and take a required decision," he said.

Gasoline price

Retail gasoline prices stopped growth in early June, he said. 

"The assumed measures have already proved effective. Retail gasoline prices stopped growing in early June, while wholesale prices went down," he said, adding that the ministry and the antimonopoly watchdog keep monitoring the situation.

Meanwhile, the Economic Development Ministry also said on Friday, that the government’s measures have proved effective.

A sharp growth in fuel prices that have risen by over 8% year-to-date, has forced the authorities to take emergency measures. The government reduced excise duties for gasoline and diesel fuel by 3,000 ($47) and 2,000 rubles ($31) per tonne, respectively, and abandoned plans to raise them by 700 rubles ($11) from July 1.The authorities also agreed with oil companies to "freeze" fuel prices and increase supplies to the domestic market, as well as promised to raise export duties on petroleum products if the rise in price of gasoline continues.

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