February 27, 2019 / 10:54 AM / in 2 months

UPDATE 1-Russia's Lukoil expects oil prices to stay relatively high

(Adds detail, quotes)

By Olesya Astakhova

MOSCOW, Feb 27 (Reuters) - The head of Lukoil, Russia’s No. 2 oil producer, said on Wednesday oil prices are likely to remain “relatively high” due to underinvestment after a 2014 slump, while a global deal to cut output was helping to keep prices “acceptable”.

Oil prices have risen about 20 percent since the start of the year largely due to an agreement by OPEC and non-member producers, including Russia, to reduce production.

Speaking at the Federation Council, Russia’s upper house of parliament, Vagit Alekperov said prices would stay in an “acceptable range” thanks to coordination between leading global producers.

“Due to the industry’s high inertia, the long cycle from investment to the start of production, we estimate that the real effect (of underinvestment) will show up from 2022,” he said.

In 2014, oil prices collapsed as the Organization of the Petroleum Exporting Countries opted to maintain the same level of output despite a global glut caused by expanding U.S. shale output and diminished demand growth in China.

Alekperov also said he expected growth in U.S. oil production C-OUT-T-EIA to slow in the mid-2020s. A surge in output in the United States has been a key factor behind weakness in oil prices.

The head of Lukoil also complained that high Russian taxes hindered full-scale oil production in western Siberia, the country’s oil hinterland where output has been sluggish.

OPEC and other oil producers led by Russia, an alliance known as OPEC+, agreed in December to cut supply by 1.2 million barrels per day (bpd) from Jan. 1 for six months. Of this, Russia has agreed to cut 228,000 bpd.

Sources told Reuters that Russia’s Energy Ministry plans to meet domestic oil companies on March 1 to discuss the OPEC+ deal.

Alekperov confirmed the meeting, saying he would take part.

Goldman Sachs said on Monday that the near-term outlook for oil was modestly bullish as the market continued to tighten significantly.

The upside potential for benchmark Brent crude exceeds the near-term outlook of $67.50/barrel and it could easily trade between $70 and $75, the U.S. bank said in a research note.

Speaking to reporters after the speech, Alekperov said a price of $60-$70 per barrel was relatively high and fair, allowing for investments. (Reporting by Olesya Astakhova; Writing by Vladimir Soldatkin; Editing by Dale Hudson and Susan Fenton)

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