Russia Prepares for $30 Oil in 2016, Which Could Mean $115 Bunkers in the Primary Ports

Russia says everything points to low oil prices next year.

With Brent crude prices having fallen to under $38 per barrel since the Organization of Petroleum Exporting Countries (OPEC) failed to agree a production ceiling at its December 4 meeting, Russia says it is now preparing for $30 per barrel oil in 2016, the Financial Post reports.

"There is no defined policy by the OPEC countries: it is everyone for himself, all trying to recapture markets, and it leads to the dumping that is going on," said Russia's finance minister Anton Siluanov.

"Everything points to low oil prices next year, and it's possible that it could be US$30 a barrel, and maybe less. If someone had told us a year ago that oil was going to be under $40, everyone would've laughed. You have to prepare for difficult times."

Even at current Brent price levels, data from Ship & Bunker shows bunker prices in Rotterdam and Houston have sunk to under $150 per metric tonne (pmt) for key grade IFO380, or around 51 percent of the pmt crude price, which is significantly lower than that ratio has been in recent years.

If the Brent / IFO380 ratio remains that low, bunker buyers could reasonably expect $30/bbl oil to translate into $115 pmt bunkers.

There are also very few signs that oil producers are willing to work together to help lift prices.

Last month energy minister Alexander Novak, and Igor Sechin, head of Rosneft, both said a meeting was possible in mid-December between OPEC and non-OPEC producers.

However that appears to have little chance of going ahead, with and unnamed spokeswoman for the Russian energy ministry telling Reuters Monday that "As of now, no meeting is expected."

Despite weak prices, Russia in November maintained an output of 10.78 million barrels per day, which is a post-Soviet high.

Meanwhile, Brent Tuesday edged up to $38.45 per barrel (its $36.76 per barrel price earlier this month having came close to matching the financial crisis lows of 2008), while lower quality oil is already selling below $30 per barrel on global markets.

Grades from Iraq and Canada were said to be earning as little as $26 and $22 per barrel respectively.

Goldman Sachs analysts in September warned that unless there is a shift in output strategy, oil could fall to $20 per barrel.