Oil prices will rebound in several months – Russian energy minister

It will take the oil market several months to recover from the current turbulence, Russian Energy Minister Alexander Novak said on Tuesday, adding that plummeting oil prices were not a surprise for Russia.

“This scenario was expected and calculated,” he told Rossiya-24 channel the day after a 30 percent drop in crude prices. On Tuesday, oil gained around 8 percent – a good signal that some panic sentiments have already vanished, the minister believes.

The recovery of oil prices will depend on a wide range of factors, primarily on how the governments will contain the coronavirus outbreak as the epidemic has an impact on demand and consumption of oil, according to Novak.  Apart from softening the demand for energy, he says Covid-19 took a toll on the economic growth of many countries and global GDP, forcing central banks to come up with stimulus measures.

“That will largely depend on how the economy recovers as a result of neutralizing the situation in this regard,” Novak added.

Prices of the commodity started falling after Russia and the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, failed to agree on new production cuts. After the kingdom announced that it’s going to offer massive discounts for exporters of its oil over the weeked, the oil market collapsed, triggering a panic sell-off on global stock markets.

While Saudi Aramco is set to ramp up production next month from around 9.8 million barrels per day to 12.3 million barrels a day, Russia is also not sitting idle. Novak says that the country can increase output by between 200,000 and 300,000 barrels per day in the short-term perspective, and can potentially further ramp up production by 500,000 barrels per day. Given that Russia’s output is believed to be 11.38 million barrels a day, the nation's total daily production may reach 11.8 million barrels after the hike.

Despite the collapse of last week’s talks, Moscow doesn’t rule out further cooperation with OPEC and allied oil producers. However, Riyadh might not be so eager to return to the negotiating table.

“I fail to see the wisdom for holding meetings in May-June. That would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures,” Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told Reuters.

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