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OPEC compromise is a return to normality

19 July 2021

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, President of the Institute for Energy and Finance, gave a comment to the Gas & Money portal on the agreements within the framework of OPEC + to increase oil production.

“You need to understand that the agreements that have been reached are, in fact, old agreements. The deal is back on track. If you look at what is on the market today, then oil prices fell by 2 percent. This is a short-term effect of lowering prices. Looking at the long horizon, this is a positive factor in terms of oil prices. It would be worse if the OPEC + countries fell out and did not find a compromise, because the deal brings more benefits to the parties involved and the market as a whole. There was a period of instability, everyone was afraid of repeating the scenario of last year, when everyone is for himself. Therefore, it was expected that the parties would agree. This is a return to normality, ” Marcel Salikhov, President of the Institute of Energy and Finance, said to Gas & Money.

Speaking about the next OPEC + meeting, scheduled for autumn 2021, the expert noted that he does not expect significant disagreements. “There will be no big disagreements at the OPEC + meeting in the fall, and even if someone asks for an increase in the level of basic production, it will happen rather mildly. We can see from prices that OPEC + is increasing production rather slowly and now there is a deficit in the market, there is a possibility of increasing production and this will not affect prices in the market as a whole, ”he said.

According to his forecasts, the price of oil will continue to grow this year and may rise to 80 and even exceed this level. “I think this year we will reach the oil price of 80. Most likely we will even exceed this level, but this is the situation for the remaining six months. Next year, supply will already grow, demand will recover and there will be no further strong growth,” Salikhov explained.

Speaking about the strengthening the ruble against the background of growing oil, the expert recalled that high oil prices contribute to the strengthening of the ruble, but in recent years this connection has significantly weakened.

“This year we saw oil prices rise from 50 to 75, while the ruble exchange rate did not react. The course does not respond as it did before the budget rule. Nevertheless, the world economy is recovering, this is positive for the ruble and we can expect strengthening,” he concluded.

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