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No quick solution to excessive oil supply issue on world market — Russian finance ministry

November 27, 2014, 19:12 UTC+3

According to the Russian Foreign Ministry's official, OPEC’s decision not to reduce oil production quotas means that the problem of excessive supply on the global market is unlikely to be solved soon

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© AP Photo/Ralph Wilson

MOSCOW, November 27. /TASS/. OPEC’s decision not to reduce oil production quotas means that the problem of excessive supply on the global oil market will not have a quick solution, an official from the Russian finance ministry told journalists on Thursday.

“We have been witnessing in the recent days that OPEC’s uncertainty in issues of limiting production has led to more negative pressure on oil quotations,” said Maxim Oreshkin, director of the ministry’s long-term strategic planning department.

He said the market continued to stray in condition of excessive supply and this OPEC’s decision meant that the problem was unlikely to be solved soon.

Oreshkin said in such conditions “even a scenarios of oil prices at $80 per barrel looks moderately optimistic for Russian in the next few years.”

“This situation is another evidence in favour of our position that Russia’s budget policy must be adjusted against the new oil prices that might stay (at a relatively low level) for a long time. The medium-term adjustment means a harsher approach to state expenditures and their possible optimization,” he said.

Speaking at the Federation Council, the upper house of Russia’s parliament on Wednesday, Russian Finance Minister Anton Siluanov warned that oil prices of $80-90 per barrel could remain in the mid-and long term perspective. “Our budget and economic plans should be built proceeding from the new macroeconomic conditions, which, in our view, will not change fast,” Siluanov said. “The new oil price of $80-90 is likely to remain for the mid-and maybe even long term.”

Since the market conditions had changed, he said, the budget should be oriented towards the new situation with prices for exported goods, primarily oil, and capital flow. “So, of course, we will need to rebuild the budget, and this will not be easy. We need to build the budget policy in a different way, optimize expenditures and at least not increase them at such rates,” Siluanov said.

On Thursday, the Organization of the Petroleum Exporting Countries (OPEC) decided to keep oil production quotas unchanged at the current level of 30 million barrels a day. OPEC Secretary General Abdalla Salem El-Badri said however, the organization might return to output quota revision in six months.

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