Russia expects to reach the maximum level of oil production reduction in the shortest possible time because it is not interested in a new market collapse, Deputy Energy Minister of the Russian Federation Pavel Sorokin said in an interview with Roscongress.

“It is necessary to reduce (oil production) and it is necessary to reduce quickly so that we can quickly close this gap between supply and demand,” Sorokin said.

“We will show statistics (production) on a regular basis so that the market can track this (execution of the transaction).”

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The first five days of May showed that the Russian Federation was close to fulfilling the terms of the OPEC + deal, in which oil production in the Russian Federation in May-June should be at the level of 8.5 million barrels per day, the level of 17 years ago.

“The punishment (if the OPEC + transaction is not fulfilled) is a new market collapse, no one is interested in it … it will inevitably lead to spasmodic growth in the future with the inability to quickly restore production,” Sorokin said.

According to Sorokin, for certain reasons, not all participating countries will be able to 100% complete the OPEC + deal. OPEC + participants, together with the G20 countries, are expected to reduce production in May and June by 15-20 million barrels per day.

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“In a number of countries there is a large presence of international companies that have more than 50% of production there … they are among OPEC, it will be harder for them, but we expect that everyone will make every effort …”, Sorokin said.

According to Sorokin, the United States and Canada may reduce production by 2.8-4.0 million barrels per day in the context of current oil prices, but part of the volume may return with the growth of quotations. Earlier, Energy Minister Alexander Novak spoke of expectations of a decrease in oil production outside the OPEC + pact by 5 million barrels per day.

Sorokin said that the current imbalance in the oil market is about 10 million barrels per day, and if in April world demand for oil fell by 30% or 30 million barrels per day, now the first signs of its recovery are observed: at the moment, demand has recovered by 2.5-3.5 million barrels per day relative to the lowest point, Sorokin added.

According to him, in the 3rd quarter of 2020, a decrease in world oil inventories will begin, subject to the restoration of population activity. The growth of world quotes above $ 30 per barrel demonstrates that the market is already laying in them a recovery in oil demand.

Sorokin said that the world “is not very fast” will return to the pre-crisis level of oil consumption – about 100 million barrels per day. The use of digital technology, which was fixed during the period of self-isolation of people due to the coronavirus pandemic, will have a negative impact on demand for many years, he said.

“It is unlikely that the world will be the same … People will go to work much less (than before the pandemic) … the same can be said about many business trips,” Sorokin said.

According to him, part of global demand will fall off after recovering from a pandemic, and in the future, global oil consumption will be at about “95 million barrels per day plus.”

According to him, after the transaction is over, part of oil production in the Russian Federation can be restored within a few weeks, a small share of companies will require about a month “with a little”.

As a result of April, the Russian Federation produced 11.35 million barrels of oil and gas condensate. Reduction quotas are distributed between companies evenly in accordance with the company’s share in production, Sorokin said.

The current demand for gasoline at gas stations in the Russian Federation has recovered slightly, the drop from the pre-crisis level is 25-30% against the 40% drop noted earlier, Sorokin added.

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Synthia Rozario
An editorial staff member at The Eastern Herald. Formerly, correspondent of The Eastern Express, Hong Kong.