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Oil prices unlikely to exceed $100 per barrel in near future - Russian finance ministry

October 19, 2014, 22:50 UTC+3 MOSCOW

The Russian budget is resistant to low oil prices

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© ITAR-TASS/Yuriy Smityuk

MOSCOW, October 19. /TASS/. Russia’s finance ministry thinks that oil prices are unlikely to exceed 100 U.S. dollars per barrel in the short-time perspective, Maxim Oreshkin, the director of the ministry’s long-term strategic planning department, said on Sunday.

“In general, the current downward price movement is structural,” he told RBС-TV. “Investments in oil production have increased dramatically in the past decade. The market is featuring excessive offer. That is why price reduction is inevitable, it will have a structural character. We are unlikely to see prices higher than 100 U.S. dollars per barrel in the near future.”

Nonetheless, he said, the Russian budget is resistant to low oil prices.

The major oil exporter - Saudi Arabia, he said, is interested in keeping oil prices around 80 U.S. dollars per barrel for a number of years. “It will decrease investments in new projects,” Oreshkin noted. “Oil prices around 80 U.S. dollars are no threat to the stability of the Saudi budget.”

Shale oil production in the United State, according to Oreshkin, is expected to go down in the next six months. “There is a specific of shale oil that within a year after drilling a well loses about 50% of its debit. It means that production drops dramatically. To maintain production levels, let alone to increase them, more drilling is essential,” he noted. “But they will start drilling only in case price conditions on the market are sufficient to ensure profitability of the project. The price of 80 U.S. dollars is the price when some projects become unprofitable, hence, drilling is to go down,” he said.

Last week, oil prices dropped to their minimum since 2010. Thus, November futures price for Brent oil at the London-based ICE Futures Europe was 85.04 U.S. dollars per barrel on Tuesday. WTI prices dropped by 4.6% in New York to 81.84 U.S. dollars per barrel. By the end of the week, oil prices somewhat increased but stayed below 90 U.S. dollars per barrel.

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