The Russian energy ministry expects the average Urals price to be $35/b in 2020. Minister Alexander Novak said in an interview with German daily Handelsblatt published June 20.
Russia’s 2020 budget is based on an oil price of $42/b, officials said previously. Novak said he currently only expects oil services providers, who have been struck by Russia’s significant oil production cut under the OPEC+ agreement, to require state support.
“We have very flexible taxation for oil producers, dependent on the oil price,” the report quoted Novak. “Our oil companies can continue to produce even when the oil price is low, thanks to reserves and then low taxes.”
He added that large Russian oil and gas companies would continue investment programs, with some cuts of up to 20%, but no fundamental changes.
Novak added that he does not expect oil demand to return to pre-crisis levels in the near term.
“Certainly not this year,” Novak said. “We hope that it will happen in 2021. But maybe it will take two or three years. Because people will fly less, drive less, travel less, and do more online. The economy will grow again, but the demand for oil from transport will remain lower.”
Russia does not currently see a need to deepen oil production cuts under the OPEC+ agreement, but the group will continue to discuss the situation monthly, Novak said.
“In July, the agreement will result in two million fewer barrels of oil on the market than originally planned,” Novak said. “Then we’ll see. There is a lot that is unclear: consumer demand, and whether there will be a second wave of coronavirus that many expect. That would again disrupt markets considerably.”