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Russia’s Energy Ministry considers $45-55 per barrel fair oil price for market

It allows demand to grow stably, according to the deputy energy minister

MOSCOW, March 27. /TASS/. The Russian Energy Ministry considers $45-55 per barrel to be a fair market priced for oil at the moment, optimal for demand growth, but would not allow shale projects to grow, Deputy Energy Minister Pavel Sorokin said on Friday.

"In our opinion, the fair price that allows the market to function, it is now in the range of $45-55 per barrel. It does not allow expensive projects to grow, but at the same time it allows demand to grow stably," Sorokin said. According to him, the contribution of coronavirus to the decline in prices is estimated at $25 per barrel; without it the price of oil would be within this range now.

"Our analysis in February showed that it is impossible to drastically affect the situation in the context of the spread of coronavirus. The decline in production that was discussed, first by 600,000 barrels, then by 1.5 mln barrels, is a drop in the bucket compared to the blow that the virus inflicted on the global economy. As we can see, a decrease in demand reaches 10-15 mln barrels per day, this is not comparable," Sorokin said.

The OPEC+ agreement expires on March 31, 2020. The deal to limit oil production could not be extended after the Q1, as Russia and Saudi Arabia, the largest parties to the agreement, could not find consensus. At the Vienna talks on March 6, the Saudi side insisted on increasing production cuts from 1.7 mln bps to 2.3 mln bps by the end of the year due to the impact of coronavirus on demand. Russia did not agree with this proposal, and wanted to extend the current agreement.

Saudi Arabia later made a number of statements about its new oil production policy. In particular, the kingdom intends to bring oil production to maximum levels - 12.3 mln bps from April, and increase oil export to 10 mln bps. Observers called this situation a price war.