ST. PETERSBURG, Jun 5 (PRIME) -- The prolongation of the OPEC+ oil production cut deal will stabilize international oil reserves and support the oil price, although only for a short-term and will vanish as soon as the agreement ends, Russian Economic Development Minister Maxim Oreshkin told reporters on June 3.
OPEC states agreed to reduce production by 1.2 million barrels daily to 32.5 million barrels in November 2016. In December 2016, 11 non-OPEC countries agreed to cut their combined output by 558,000 barrels, including Russia, which has agreed to slash production by 300,000 barrels daily compared with the level of October 2016.
On May 25, participants of the oil output reduction deal agreed to prolong it for nine months, until April 1, 2018 at unchanged terms.
“The very important thing here is that the agreement helps stabilize the market situation from the point of view of reserves. The reserves are falling and we have now entered a period of high demand, so reserves will fall faster and normalize faster,” Oreshkin said.
The OPEC+ participants hope for the commercial reserves of oil to fall to a five-year average. “Can we say that this will allow us to hold oil prices in the long-term? No,” he said.
“Actually, those banks that hedge (oil) producers for the next two or three years take great risks…Yes, the market will be in a state of falling reserves in the next nine months of the agreement’s operation, which will support short-term prices of oil, but it is unclear what will happen next.”
He said that fluctuations of oil prices above U.S. $40 per barrel are non-essential for the Russian budget.
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