Key players in the oil market must use their capacities wisely

14 october 2016 | Russia - 24

Oil prices have gone past USD 50 a barrel. However, experts do not think it is likely that the price of oil will return to USD 80-90 a barrel unless there is some major economic crisis or a military conflict. The prices rose on the news of the emergency at the Fukushima-1 nuclear power plant and the disintegration of Libya. If those things had not happened, the shale revolution would not have happened at this scale,” believes Chief Adviser to the Head of the Analytical Center Leonid Grigoriev.

Leonid Grigoryev
Leonid Grigoryev
Chief Adviser to Head of the Analytical Center

“Key players in the oil market must use their capacity wisely. Producing 11 million barrels and selling them at USD 60 a barrel is more profitable than producing 12 million and selling them at USD 50 a barrel. It is a very simple calculation,” Mr. Grigoriev said on "Energetika" show on Russia-24. In the past 2 years low oil prices have put downward pressure on exporting nations so in all likelihood they are going to get wise now and refrain from producing too much oil, the analyst believes.

Experts estimate that the current glut of oil around the world is about 1.5% of global output. In the meantime, we are seeing a bull market at the moment. “Financial traders that trade in futures cannot risk and buy a futures contract at USD 30 if they are expecting a production freeze. The market is as sensitive as a stock exchange and official announcements always have an impact,” Mr. Grigoriev explained.