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Conditions for rising oil prices

03 February 2021

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Aleksey Belogoryev, Deputy Director for Energy at the Institute for Energy and Finance, commented on the prospects of price fluctuations in the oil market to the newspaper Vechernyaya Moskva.

Saudi Arabia has begun an additional reduction in oil production in the amount of 1 million barrels per day. Whether this decision will become the beginning of a long-term rise in prices, experts in the field of energy were asked.

Aleksey Belogoryev, Deputy Director for Energy at the Institute for Energy and Finance, notes that Saudi Arabia among the OPEC + and OPEC member countries is in favor of a drastic reduction in production and in the midst of the oil crisis in the spring of 2020 has already undertaken a large-scale reduction in production.

- Saudi Arabia's decision was one of the factors that supported oil prices. Saudi Arabia understands that by selling 8 million barrels at $ 55, they will earn more than 9 million at $ 45, he says.

Despite the actions of Riyadh, it would seem, in favor of higher prices, Belogoryev does not expect fundamental positive shifts in the oil market.

- This is an attempt to support prices. The market as a whole lives with expectations. This decision of Saudi Arabia was known half a month ago, and the market has already reacted to the advance - prices have already increased. In the future, medium-term prices may fluctuate. But fundamental growth should not be expected; on the contrary, there are downside risks, - the expert noted.

Overproduction continues to have a negative impact on oil prices. Conflicting estimates of the effectiveness of the vaccination scale can have the same effect. Prices could also fall if the United States makes a deal with Iran and lifts sanctions on it, Belogoryev said. The intensification of production in the United States will also prevent prices from rising.
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