EMEA News
Rosneft Budgeting for $63 Oil as Russia, Iran Mull Energy Cooperation
Russia, which is frequently relied upon to provide a sober, no-nonsense assessment of where the crude market is headed in the near and long term, is lending credence to analysts who think prices are heading downward due to the ability of so many countries to easily turn on the taps and compensate for interrupted production in other parts of the world.
Specifically, Igor Sechin, CEO of Rosneft, said in an interview with state TV channel Rossia One, that his production company is basing its budget on an oil price of $63 per barrel.
This comes amid persistent wild speculation based solely on geopolitical fears that prices will soon escalate into the triple digits, as the U.S. sanctions against Iran take hold, that country's production plummets to zero, and major producers such as Russia, Saudi Arabia, the U.S., and other countries won't be able to make up the shortfall.
Ironically, crude prices have been steadily declining over the past few weeks because of the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia agreeing to ease global output cuts, adding around 1 million barrels per day to the market from July 1.
Sechin said of the current market situation, "I think the (oil) price will approximately be within a range of $75, maximum $80 per barrel."
As for the fear that the sanctions against Iran will be disastrous for other countries because it will severely restrict trade with the Islamic republic, a separate Russian initiative suggests the impact might not be as calamitous as thought: on Monday Alexander Novak, energy minister for the former Soviet Union, met with Bijan Zanganeh, his Iranian counterpart, in Moscow to discuss energy cooperation between the two countries and through OPEC.
Novak's ministry said in a statement that the two ministers also discussed the possibility of Russian oil companies taking part in projects in Iran.
Despite talk of crude prices in the triple digits, the analytical community if anything consistently underestimates the ability of individual producers to influence prices: last week, for example, Brent plummeted by 1 percent due to a worker strike ending at Norwegian drilling rigs and news that Russia had used stocks to help boost crude output in June - a surprising sign of flexibility in a country where adjustments are thought to be harder to enact than in other parts of the world.
