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Rosneft CEO Sechin hints on possible crude price hike of up to $110 per barrel

February 16, 2015, 5:39 UTC+3 LONDON
Price for Brent crude almost halved since summer of 2014 plunging to current $61 per barrel and hitting the bottom mark of $47 last month as well
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Igor Sechin

Igor Sechin

© ITAR-TASS/Alexey Druzhinin

LONDON, February 16. /TASS/. World crude prices are possibly to peak $110 per barrel in case "many current production projects will be mothballed," Russian oil major Rosneft CEO Igor Sechin wrote in his exclusive article for British daily Financial Times.

"In 1985, investing in a new well was worthwhile if the oil it produced would fetch between $20 and $30 a barrel," Sechin wrote. "Now, more oil comes from wells that are tricky and expensive to build; the break-even price is closer to $60 or $100."

Infographics Oil prices over 30 years Oil prices over 30 years
Year-average inflation-adjusted oil price. Infographics by TASS

"Look at the market fundamentals and it seems prices should soon rebound to the $60 or $80 a barrel levels that would make it worth building the wells that the world needs," Financial Times quoted Sechin as saying.

However, according to Rosneft CEO "if markets are distorted, and the rebound takes longer than it should, many current production projects will be mothballed - and the price will eventually climb to $90 to $110 a barrel, or higher."

Price for Brent crude almost halved since summer of 2014 plunging to current $61 per barrel and hitting the bottom mark of $47 last month as well.

Last week in an interview with The Independent, Sechin voiced the same opinion saying that the world oil prices would be $60-80 per barrel in 2016, if the level of investment in the oil industry was recovered.

According to the Rosneft CEO, if investment levels were not recovered and the supply-demand equation was not rebalanced, world oil prices could bounce back to $100-$110 as the lack of investment in drilling would cause a shortfall in production.

BP CEO Robert Dudley earlier said estimated that world record low crude prices could remain unchanged for three years to come.

According to Russian Energy Minister Alexander Novak’s earlier forecasts, world crude prices of $70-80 per barrel are the most favorable conditions for the Russian oil industry.

Speaking with Bloomberg news agency earlier this month Russian Central Bank Chief Elvira Nabiullina said that the country’s GDP might decline by 3-4% in 2015 at an oil price of $50 per barrel.

"If oil prices stay near the current level of $50 per barrel, our latest calculations show that the economy will see a decline. We’ll have negative growth rates of between 3 and 4%," Nabiullina said.

She added that the Russian regulator would issue its revised economic forecast in March.

Economic Development Minister Alexei Ulyukayev said on January 31 that Russia’s GDP would contract by 3% in 2015 at an oil price of $50 per barrel. The ministry’s previous forecast expected the country’s GDP to fall by 0.8% in 2015.

Meanwhile, US Investment Bank Morgan Stanley said earlier it expected Russia’s GDP to fall by as much as 5.6% in 2015 and 2.5% in 2016.

Morgan Stanley’s updated forecast for Russia’s GDP decline in 2015-2016 was worse than its previous outlook, which predicted that the Russian economy would shrink by 1.7% in 2015 and grow by 0.8% in 2016.

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