Russian President Vladimir Putin said on Thursday the $50 per barrel price for oil factored in the 2016 budget was too optimistic and the government needed to make adjustments.
“We had calculated next year’s budget based on $50 per barrel. This is a very optimistic valuation today. Now it’s already $38. That’s why we will have to correct something there,” Putin said at his annual news conference, CNBC reported.
He said the peak of the economic crisis in Russia had passed but the government’s forecasts for 0.7% economic growth in 2016 and 1.9% growth in 2017 were based on assumptions the oil price would be $50 per barrel.
Russia’s Energy Minister Alexander Novak said on Friday his country was not considering any coordination with OPEC in order to support falling oil prices because the organization had lost its power to regulate the market.
Russia, one of the world’s top oil producers, has long maintained informal contacts with OPEC and has hinted in the past it might be ready to cut oil production to prop up prices.
But it has changed tack recently, saying it is unable to halt production at most of its wells and quickly restart it if needed because of Russia’s harsh climate.
“OPEC has not changed quotas since 2008 and it doesn’t play the role it used to in 1970s and 1980s,” Novak said. “We are not considering the viability of any kind of coordination.”
OPEC failed to reach a decision at its last meeting earlier this month, sending the price of Brent to near 11-year lows below $37 per barrel.
By maintaining low prices, Saudi Arabia, OPEC’s dominant member, is trying to squeeze out high-cost competitors, especially shale oil producers in the United States, to maintain its own market share.
Novak complained the market was over supplied, in part due to production by traditional importing countries such as the United States, which cut imports. He also said global investment cuts would inevitably lead to a decline in worldwide oil output.
The fact that Russia is not willing to curb its own oil output, currently running at a post-Soviet record-high of around 10.78 million barrels per day, is evidenced by how actively it has been drilling. Novak said he sees oil prices at $45-$50 per barrel next year. “This is a normal market price which should allow everyone to compete with one other,” said Novak.
