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Page added on November 27, 2014

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Russia Says Will Keep Oil Output Steady In 2015

Production

Russian oil companies will keep production steady in 2015, Energy Minister Alexander Novak said on Wednesday, after Moscow left a meeting with other major oil producers with no agreement on how to address weak oil prices.

Russia, which is not an OPEC member, has watched nervously as oil prices have fallen 30 percent since June and analysts say Moscow had hoped to convince other members and non-members to support a production cut at an OPEC meeting on Thursday.

After talks between Saudi Arabia, fellow OPEC member Venezuela and oil power Mexico ended without an agreement on Tuesday, Russia’s message was clear – daily average oil production of around 10.5 million barrels will be maintained.

“We have got the plans which companies have embarked on for next year: (output) will be along the same lines as this year,” Novak told reporters.

Russia is hoping to keep output stable by exploiting new areas such as the Bazhenov oil formation and Arctic offshore.

Novak, who was in Vienna on Tuesday, also said he was sceptical that OPEC would decide to cut output quotas to shore up oil prices which have fallen to around $78 per barrel.

“We don’t know what decision will be taken tomorrow … Consultations have been going on over recent days … In general, I am sceptical that any decision on output cuts may be taken,” Novak said.

Over the last couple of days Russia, which needs price of at least $100 per barrel to balance its budget, has been sending mixed signals to OPEC ranging from a possible slight cut in production to keeping its output flat to help prices.

Despite being among the world’s top three crude oil producers, Russia is limited in its ability to rapidly cut or increase supplies to global markets, with some analysts suggesting it may see a natural decline in output in 2015.

Novak said that lower oil prices would close ineffective oil projects, decreasing output to support prices which should return to a “fair level”.

At the same time, he added that Russia would not postpone its Arctic projects, while the Bazhenov oil formation was also continuing even under the current oil price.

RIGZONE



28 Comments on "Russia Says Will Keep Oil Output Steady In 2015"

  1. bobinget on Thu, 27th Nov 2014 10:49 am 

    Brave talk.
    This just in.
    KSA refuses to cut production.
    While Russia’s currency in in the shitter, because crude oil is settled in dollars, the pain is lessened.

    If I know anything about Russia, Venezuela, Iran,
    Iraq, they are not about to accept $60 range crude.

    The Saudis don’t even seem to acknowledge there is a problem.

    Forget about the ten other oil wars in progress. The battle for OPEC supremacy has been struck.

  2. Northwest Resident on Thu, 27th Nov 2014 10:56 am 

    “Russia is hoping to keep output stable by exploiting new areas such as the Bazhenov oil formation and Arctic offshore.”

    So which is it? They WILL keep output steady in 2015? Or they HOPE to keep output steady in 2015?

  3. ghung on Thu, 27th Nov 2014 11:03 am 

    The Great Thanksgiving Day Shale Bloodbath?

    I’ve got to give it to OPEC. Their timing is wicked; “Black Thursday”.

  4. GregT on Thu, 27th Nov 2014 11:27 am 

    WTI=73.69

    Happy (motoring) days are here again! Just in time for Black Friday, and the winter holiday consumption festival.

    Gotta get those numbers up! Confidence is everything. Until the forthcoming rise in interest rates……………

  5. Eran on Thu, 27th Nov 2014 11:37 am 

    The tight oil industry were only a buffer for oil prices for a while. I believe it be might soon enough when prices will bump again than all this shale oil industry will get into more troubles to keep production at those level. I guess we’ll see production rates in US decreasing in the coming months because no motive to decease further the price by pumping more oil and not some wells might be in fact in real trouble now selling at those prices. Watch out because this is going to be interesting while the world is going crazy.

  6. ghung on Thu, 27th Nov 2014 11:39 am 

    Gosh, Greg I’m looking at WTI below $70, albeit off it’s low below $68, earlier. (CNN, Bloomberg)

  7. GregT on Thu, 27th Nov 2014 11:49 am 

    Guess I need to refresh the charts more often……

    Things just keep getting better and better.

  8. oilystuff on Thu, 27th Nov 2014 12:47 pm 

    I am glad you are having fun AH’s because there are a lot of hard working men and women in the US domestic oil industry who right now are very, very worried about their jobs, and their families, and Thanksgiving for them is a little troubled today. Christmas is likely not going to be too good for them, either.

  9. rockman on Thu, 27th Nov 2014 1:06 pm 

    “The Great Thanksgiving Day Shale Bloodbath?” And all a $20/bbl lower oil price will do is reduce OPEC income by $960 BILLION over the next 12 months. I doubt OPEC will be feeling very thankful for the current price trend. Especially since they understand the US shale plays will rise from the ashes whenever prices recover. After all the oil patch started throwing money at the shales in 2009…just 10 years after suffering $18/bbl oil prices.

    It’s always been the case in the oil patch: when oil/NG prices get high enough the capex always shows up. I see no reason to expect the greed dynamic to change. It’s like a law of nature. LOL.

  10. Northwest Resident on Thu, 27th Nov 2014 1:22 pm 

    “…there are a lot of hard working men and women in the US domestic oil industry who right now are very, very worried about their jobs, and their families…”

    oilystuff, if people were smart enough and informed enough, it wouldn’t be just the guys working in the oil patch who would be worried. While it may be true that the oil workers will be the first ones to feel the decimating impacts of this oil price slide should it continue — and it looks like it is set to do just that — the fools and ignoramuses who are celebrating the lower oil and gas prices do not realize what this development portends for their own pathetically ignorant lives.

    I personally don’t think any (or many) of the posters on this site are celebrating or having fun with the drop in oil prices, as you imply. I know that I am most definitely not. If you detect a certain amount of excitement in the posts on these and other articles, I wouldn’t interpret that excitement to be of the “whoopee, we’re having fun now” type of excitement, but more of the “whoopee, we’re all going to die” type of excitement — like the folks on a jetliner that lost its power and spiraling downward out of control.

    This moment has long been approaching. In 2008, the governments BOUGHT SOME TIME by throwing trillion$ in debt into the economies of the world, very little if any of which filtered down to regular Joe’s, most of which dramatically inflated asset prices and provided the liquidity needed to bankroll the “shale revolution”.

    It was a short term patch, a strip of duct tape on a crack in the dam. There was never any doubt but that the duct tape would eventually give way to the inevitable flood, and from the looks of it, this is the beginning of that flood that has long been in the making.

    If you see people smiling and high-fiving in response to the plunge in oil price, be assured, the last laugh will be on them.

    Ultimately, oilystuff, the whole world is in the same boat as you guys in the oil business. We’ve been riding the same rough seas with you guys all along, loving the adrenaline rush of the BOOMS and feeling the pain and anguish of the BUSTS. But you, being in the oil business, should of all people know that it has to end on a BUST, someday. I think this is it, the last bust. Others think there’s enough financing and enough shale oil buried deep to light the fire under another boom at some point in the future. Either way, the final destination is written on the wall and carved in stone.

  11. marmico on Thu, 27th Nov 2014 1:25 pm 

    And all a $20/bbl lower oil price will do is reduce OPEC income by $960 BILLION over the next 12 months

    Somebody doesn’t know arithmetic. OPEC ex-Iran revenues in 2013 were $813 billion. Now you can tell us all that based on your arithmetic OPEC will be paying importers to take oil. Go choke yourself. 🙂

  12. Davy on Thu, 27th Nov 2014 1:29 pm 

    Oily, not to lessen the honorable people’s pain you mentioned above but maybe they should join the crowd in the wider economy of all those people who have lost their jobs in the past several years. IMA while the oil patch boys were living the high life on bubble based money that was basically a huge wealth transfer from savers to speculators. These oil patch boys seeing huge windfalls from this gold rush all the while other sectors were being wiped out.

  13. bobinget on Thu, 27th Nov 2014 2:19 pm 

    America’s tax cut.

    Oil prices get slashed 40$ (since June).
    Does anyone even know about how much oil is considered a glut? If just 500,000 BBp/d were taken off markets, we would have perfection.

    Last week BTW, US Consumption jumped to 19.9

    Total products supplied over the last four-week period averaged 19.9 million barrels per day, down by 1.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.2 million barrels per day, up by 1.3% from the same period last year. Distillate fuel product supplied averaged over 3.8 million barrels per day over the last four weeks, down by 7.8% from the same period last year. Jet fuel product supplied is up 2.7% compared to the same four-week period last year.

    http://ir.eia.gov/wpsr/wpsrsummary.pdf

    Petroleum_Storage_Charts_26-November-14

    /uploads/13230/files/Petroleum_Storage_Charts_26-November-14.pdf

  14. JuanP on Thu, 27th Nov 2014 3:48 pm 

    I expect Russia’s oil production to decrease 1-3% next year, as long as there are no big geopolitical, economic, or price changes.

  15. shallowsand on Thu, 27th Nov 2014 4:28 pm 

    Davy. It is too bad they went crazy and borrowed so much money. I’m worried about not only the low oil price, but also systematic risk to our financial system. Junk bond defaults? Counter-party risk on all of those who are on the wrong side of the industry’s $90+ hedges in 2015? What impact will that have?

    Northwest. I keep telling myself you guys are wrong. Drops like this make me question that, but really no choice other than to hopefully ride it out, again.

    Oilystuff. Yes this stinks, especially for all of those who will be out of a job. This drilling binge couldn’t go on, IMO. Most of them weren’t cash flowing at $90+. Just have to hang in there for next spike and then decide whether its time to get off the ride. I don’t think this is the last go around, but if so, assume a lot going to be worse off than me. Russian’s quote comparing shale to dot com bubble may be on point.

  16. Makati1 on Thu, 27th Nov 2014 6:43 pm 

    Perhaps the slippery slope down just got oiled …

  17. Ron Patterson on Thu, 27th Nov 2014 7:04 pm 

    “Russia is hoping to keep output stable by exploiting new areas such as the Bazhenov oil formation and Arctic offshore.”

    They are pinning their hopes on the Brazhenov Shale and/or the Arctic Ocean. They have nothing going in either place right now and either would be an extremely expensive undertaking and take years to develop. And at current oil prices, both would likely be money losers.

    But hope springs eternal.

    But now, or rather again, we have it from Mother Russia herself, they are at peak oil production. I say again because Russia has been predicting for months now that 2014 or 2015 would be their peak.

  18. Northwest Resident on Thu, 27th Nov 2014 9:43 pm 

    Ron — I see your article under the title “Something Doesn’t Add Up In Bakken Production Figures” over on OilPrice dot com. Really nice article, one that a total neophyte such as myself even comes close to being able to understand. It has been my impression for a quite a while that things not only in the Bakken but in the entire shale industry “doesn’t add up”, and it’s nice to get some factual confirmation of that intuitive suspicion.

    On another note, I see that you were a “computer engineer” before you retired. May I ask, what “kind” of computer engineer? Software engineer? Network? Hardware? Reason I ask is because I am a software engineer (web developer and back end developer on Microsoft platform), and I’m wondering if perhaps your experience working on oil industry related software applications is where you developed a solid base of knowledge in all things oil related? Just curious…

  19. GregT on Thu, 27th Nov 2014 11:09 pm 

    Oily,

    On two different radio stations today, the news that was repeated over and over again, was how the latest oil price drop is going to be good for retail sales over the holiday season. The other news item, was that we will now be able to add another 200,000 vehicles to the Canadian fleet, due to the massive increase in disposable income.

    The herd is happy with cheaper oil prices. Happy people spend more money and go further into debt. People will drive miles out of their way, and sit in long line ups, to save a few dollars at the pump. Very few appear capable of actually giving any thought as to how much they are really saving.

    There is nothing funny about the recent oil price drop. The US domestic oil industry may be getting hit now, but the rest of the economy is most likely soon to follow.

    Sorry if you didn’t catch the sarcasm.

  20. GregT on Thu, 27th Nov 2014 11:49 pm 

    Geez Nony, er Marmico.

    Grow up already. 🙂

  21. oilystuff on Fri, 28th Nov 2014 6:51 am 

    It was a bad day yesterday for the domestic oil industry.

    Nobody dislikes and mistrusts the shale oil industry more than I do; in the process of borrowing everything but the kitchen sink to drill these high cost, low return wells it has shot itself in the foot and help put the supply/ demand situation temporarily out of balance. In the process it shot me, and other conventional producers in the back. The shale oil industry and the real oil industry are two different species. The the shale industry can eat fish heads, as far as I am concerned.

    But the job growth the shale oil industry in this country created has been nothing but phenomenal. If you are out of work, 3 month ago you could have found work easily, save the whinning. Lower oil prices will not create new jobs.

    Lower gasoline prices will make it easier to drive to the mall this holiday season, and drive your kids to school every day because they are too lazy to take a school bus, but lots of people are going to lose their jobs. Thousands and thousands. I am going to have to go in my office this morning and put some very good men on notice that things are not looking very good right now. I’ll cut my pay to keep them employed, as long as I can, but its bleak right now. These kinds of swings and collapses in oil prices serve no one, actually. What we need is stability in prices…that is what is best for America, and best for the world. I believe that all you guys that understand peak oil problems know that.

    I am simply asking folks to be respectful of the jobs that are going to be lost, please.

    Thank you.

  22. Davy on Fri, 28th Nov 2014 7:17 am 

    Shallow, I am fascinate with systems thought. I am a finance guy by education and work. I did many other things besides finance and most of my personal education is non-financial. I was an owner in a business with 500 people so I know business. The reason I mention this is today’s finance is a riddle I don’t even try to understand it even with my BA in finance and 10 years as a finance manager.

    Finance fits nicely in my systems thought view point. I can look at the big picture but I do not feel confident to comment on the details in finance. So your above question is beyond my scope. I am a generalist not a specialist. This oil price slide will have consequences for the highly leverage areas of the financial markets. This price slide will be a tax break for the consumer and possibly benefit related companies. I don’t think the benefits to retail will be enough in summation to offset the systematic risk to the global system of the slide in oil prices below the goldilocks range. Retail is a dead man walking anyway.

    This is a new normal. In fact a newer new normal. We are not even in the new normal which was financial repression post 08. We are now in the post financial repression period where diminishing returns has overtaken financial repression through across the board unmanageable debt levels. In effect this financial repression is creating drag to an economy already in turbulence with drag left over from 08 and 6 years of financial repression. We see the side effects currently. We see economic activity faltering because economic activity cycles even the repressed kind.

    For me to get my mind around this I have to see this as the inflection zone between a bumpy plateau and a bumpy descent. Momentum is carrying us. Confidence is still holding. No vital structures have failed. Maybe Japan soon or maybe the oil industry if prices keep dropping but the global ship is still floating. We still have confidence and momentum so this newer new normal could proceed a few more years. But anyone here has to admit the turbulence is showing itself. High turbulence precedes a phase change in my favorite analogy with water.

  23. Kenz300 on Fri, 28th Nov 2014 7:37 am 

    Oil projects that made sense at $100++ are being reevaluated at todays lower prices………

    New risky production will slow or stop………

    The world economy will get a boost from the lower oil prices and that will help to pull economies back from the effects of the Great Recession…..

    As the worlds GDP picks up boosted by lower oil prices demand will also rise……

    Enjoy the lower oil prices while they last…… In the end they will go higher……

  24. shortonoil on Fri, 28th Nov 2014 8:00 am 

    Oil opened at $69+ this morning. As we stated here a few days ago we expected at least a “token” cut in production from OPEC; just enough to keep the market from going into spasms, and prevent the Venezuelan representative from having a heart attack. Well, we didn’t even get a token, and the market in typical knee jerk reaction over compensated. Our model ( which by the way has been 96.5% accurate over the last 53 years) puts a $77 price tag on 2015.

    http://www.thehillsgroup.org/depletion2_022.htm

    Not enough to start shut-ins, but enough to take the fun out of being in the oil business. 2016 will see another decline, but not as much as 2014; down to $66. From here on out it will be like using thumb screws on someone; each little twist will be agonizing, but not enough to kill most victims. High cost producers will eventually succumb, and legacy fields will be the last man standing.

    http://www.thehillsgroup.org/

  25. JuanP on Fri, 28th Nov 2014 10:01 am 

    Short, is that $77 a yearly average?
    I expected OPEC to do nothing for geopolitical reasons. Economic considerations are not the most important at this time, IMO. This was a political play.

  26. JuanP on Fri, 28th Nov 2014 10:03 am 

    Short, I followed the link. Thx.

  27. shortonoil on Fri, 28th Nov 2014 10:43 am 

    Short, is that $77 a yearly average?

    Yes, that is a projection for WTI quoted by the EIA for 2015. Short term prices can bounce around by as much as 30%, so don’t put too much weight on daily quotes. Big players can, and do game the market short term, but fundamentals always win in the long run. OPEC played the system for five years between 1980 – 1985 and got their butts cleaned in the process. I doubt they will try anything like that again.

    I can answer more complex questions here:
    http://peakoil.com/forums/the-etp-model-q-a-t70563.html

  28. Makati1 on Fri, 28th Nov 2014 6:33 pm 

    All the guessing in the world will not change the future. I suspect that if the real numbers and facts were known, it would show the oily situation to be near the cliff of financial collapse.

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