Yuri Shafranik prognoses oil prices will rise to $50 a barrel by next year
Published: 2020-10-28 12:01:45

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A turbulent year in global oil production, mainly caused by a huge drop in consumer use of fuel due to the pandemic, was compounded by a perceived Russian and Saudi price war which kicked off back in March. Officials in both countries have continued to strenuously deny the existence of such, either against each other or any other oil-producing country.

Saudi Arabia initiated a 65 percent quarterly fall in the price of oil. At the beginning of March, US oil prices fell by 34 percent, crude oil fell by 26 percent and Brent oil by 24 percent.
Russian officials back then argued that it was too early for production cuts before understanding the full impact the virus outbreak would have on oil prices.

Pavel Sorokin, Deputy Minister of Energy of Russia, doubted that the cuts would work saying: "We cannot fight a falling demand situation when there is no clarity about where the bottom is. It’s very easy to get caught in a circle when, by cutting once, you get into an even worse situation in say two weeks down the line. Oil prices would shortly bounce back before falling again as demand continued to fall." 

OPEC’s crude oil demand projections for 2020 were subsequently revised somewhat higher, but still, they remained below pre-pandemic highs. World oil market won’t fully recover until after 2021, OPEC has said, as the increase projected for the next year still pales in comparison to the demand decline in 2020.
In contradiction of Sorokin’s earlier comments, Russia then made an offer to prolong the current OPEC+ combined cuts of 1.7 million barrels per day for three months, in order to assess the real impact the coronavirus crisis had on oil demand before more cuts. OPEC quickly refused the proposal.

This led to Russia taking a tough stand. The country's Finance Ministry issued a statement saying Russia could withstand the drop in oil prices for “six to ten years” by tapping into the Kremlin's foreign currency reserves.

It’s perhaps worth taking stock of just who has the most oil reserves. Perhaps it’s no surprise that the US is at the top of the list with an estimated 264 billion barrels of recoverable oil reserves, closely followed by Russia with 256 billion. Saudi Arabia has 212 billion, Canada 167 billion, Iran 143 billion, and Brazil 120 billion.

But what does all this mean for us, the consumer?
In a report at DBC Media (https://dbcmedia.co.uk/2020/06/24/yuri-shafranik-predicts-oil-prices-rise-by-the-end-of-the-year/) the Chairman of the Union of Oil and Gas Producers of Russia, Yuri Shafranik (https://shafranik.com/zhiznennyi-put), while speaking at the multimedia press conference at the MIA Russia Today last summer, predicted that oil prices will reach $40 per barrel by the end of 2020. The energy expert further added that next year a barrel could easily rise to $50.

Yuri Shafranik makes no bones about it - the drop in prices was the inevitable result of withdrawing from agreements with OPEC, he states in the DBC Media article. The situation, he says, developed according to the well-known Russian proverb: “Entrance is the rouble, the exit is 100 roubles.” 

A revision of the deal was inevitable, Shafranik says. “The agreement outlived itself. Russia received a certain effect from the agreement, but the players who were not included in the deal received greater benefits. Being covered by the deal, Canada and the USA developed their capacities. Since 2012, the US has gained tremendous benefits through the effect of shale oil and gas development - one can only envy. But the Russian fuel and energy complex also received tremendous benefits, which have not existed since the days of the USSR.”

The DBC Media report goes on to say that, to overcome the current crisis, the Russian expert believes that tax policies should be relaxed and there should not be any reduction of investments in the energy complex. 

Yuri Shafranik adds: “We forecast that in the problematic situation we will have to improve the tax system. The earlier, the better. My strong personal advice to the government would be to take certain measures. There is no need to do anything inconceivable. There is no need to change the Constitution for that - but what has to be done is that all small-sized and medium reserves and fields must be shifted to the territory management.”
The DBC Media report adds that, on a hopeful note, Shafranik reminds that in the 1990s such a process was “exaggerated.”
“Today the government is different, it will correct all the excesses. But it will bring revival,” Yuri Shafranik concludes.

You can read the full DBC Media report at: https://dbcmedia.co.uk/2020/06/24/yuri-shafranik-predicts-oil-prices-rise-by-the-end-of-the-year/