No need to stabilise oil market after Brexit -- Russian minister

MOSCOW, Jun 24 (PRIME) -- Oil producing countries do not need to stabilize the market after the U.K has voted for leaving the E.U., Russian First Deputy Energy Minister Alexei Teksler told PRIME on Friday.

“We think that no additional actions of large oil producers are needed to stabilize the situation at the current stage,” he said.

“We believe that Brexit will have no serious direct effect on our relations with partners because most projects are implemented directly with companies and are based on mutually beneficial cooperation, which is not connected with the status of the E.U. Such projects as Nord Stream-2 are also unlikely to be affected by the decision of the U.K. now.”

At the same time, oil producers may be put under pressure by a higher oil price volatility and a possible rise of financing costs for E.U. companies on the back of higher risks, the deputy minister said.

Energy Minister Alexander Novak said that oil production in the North Sea may become more attractive, because the British pound has weakened on the U.K. vote to leave the union.

“The total output volume in the British part of the North Sea is about 0.5 million barrels daily. Two scenarios are possible here – a weaker pound will make production in the North Sea more competitive, or problems with financing will hamper investment. We believe that the first one is more likely,” the minister said.

OIL PRICE VOLATILITY

A ministry representative said that oil price volatility is expected to rise in the short run, but the Brent price may fall significantly only if there are additional negative factors.

Trade volumes on emerging and commodity markets are likely to fall soon, the representative also said.

“Oil has already fallen by up to 5% at night, and volatility is likely to persist. But we expect that the market will return to fundamental analysis quite soon, and if the demand-supply situation is balanced, the oil price is unlikely to be depressed significantly,” the representative said.

“But if supplies that were suspended due to a force majeure (Canada, Nigeria) are resumed soon, then, coupled with the uncertainty after Brexit, oil prices may fall significantly in the short term.”

End