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Oil price after OPEC+ deal to stay within $30-40 per barrel - Lukoil vice-president

Lukoil hails the results of the oil production cuts deal between OPEC+ and a number of other nations, the company’s vice -president and co-owner, Leonid Fedun, said on Saturday.

"Should the deal be not reached, we will have to mothball our well all the same if the prices dropped to $15-20 per barrel, actually having no normal money flow either to the sector or to the budget, with the export duty being zeroed. Now we can expect that oil prices will stay in the range from $30 to $40 US," he said in an interview with RBC.

According to Fedun, thanks to the deal Russia will receive an extra of $70-80 mln dollars in revenues as day. Moreover, the deal has stopped the price war with Saudi Arabia which has been aggressively undercutting prices offering its oil to Europe with a discount of ten US dollars per barrel. "Futures contracts we see on screens are one thing and real supplies are quite another thing. Actually, they have begun to squeeze Russian oil out of European manufacturers [of petrochemicals], filling their storage facilities. And the fact that Saudi Arabia will stop undercutting prices now, as will the United Arab Emirates, Kuwait and Iraq, is obviously an advantage for Russia," he said.

However he admitted that the deal with OPEC had negative aspects too. "I would cite an example of the Treaty of Brest-Litovsk when due to various reasons the Bolsheviks had to cut a humiliating deal with Germany in 1918," Fedun noted.

He said he anticipated that by the second half of the year oil prices would be nearing $40 per barrel and the market would reach a balance not earlier than the end of 1022. "It is a realistic forecast if coronavirus rolls back and demand restores. The deferred demand is quite high and I think reserves will stop augmenting by June to begin to reduce. But final equilibration of demand and supply can be expected not earlier than the end of 2022," he added.


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