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Russian minister sees oil prices stuck at $50 “for years”

Russian minister sees oil prices stuck at $50 “for years” thumbnail

Russia’s economy minister warned that the nation is facing years of oil prices at about $50 as a sluggish global economy ushers in a long cycle of low commodities prices.

The world’s largest energy exporter must continue financial support for non-commodities exports to buoy the nation’s shrinking economy, Alexei Ulyukayev told a conference Wednesday in Moscow. Measures to help growth by encouraging local food production are starting to pay off, according to First Deputy Prime Minister Igor Shuvalov.

“We have entered a period of low prices for commodities, a long commodities cycle that’s ongoing and that will continue for a number of years,” Ulyukayev said. “I don’t see any sharp slumps but, relatively speaking, the oil price will be $50, $50 plus for years.

Faced with the oil-price weakness and sanctions over the crisis in Ukraine, Russian officials are searching for ways to steer the country out of its longest recession in two decades. Consumers are enduring the brunt of the crisis: September retail sales sank the most since 1999, while wages and disposable incomes also shrank. The ruble, the world’s fifth-worst performer in the past year, has tracked Brent oil’s 15 percent recovery from August’s six-year low.

Firefighting Steps

Shuvalov told lawmakers that the economy “isn’t in tatters,” and that the situation is “fully under the government’s control.” Replacing imports with domestically produced Russian goods after the government banned food from the European Union and the U.S. “have begun to work,” he said.

Deputy Finance Minister Maxim Oreshkin went further, saying Russia’s “crisis, as such, has ended” as foreign capital starts to return.

“We see a resumption of syndicated lending, inflows of capital to units of foreign businesses and investment in Russian bonds,” Oreshkin told another conference on Wednesday. Even so, “Russia’s economy isn’t at a level where it can feel comfortable,” and “growth needs to shift from non-tradable sectors such as finance, construction and services into tradables.”


22 Comments on "Russian minister sees oil prices stuck at $50 “for years”"

  1. makati1 on Wed, 21st Oct 2015 7:22 pm 

    $50 … or lower. Adjust now.

  2. dissident on Wed, 21st Oct 2015 9:18 pm 

    Good thing for Russia. Now they can shift resource export taxes to wood, fish and other unprocessed goods. This will generate value added production in Russia.

    These articles are the usual western media crap. The Russian GDP contracted because the ruble devaluation created an inflation spike that suppressed consumer demand (e.g. car sales fell by over 50%). Now that the inflation has settled down (as of March, 2015) the demand is returning and industrial production is picking up from its April crash.

  3. BC on Wed, 21st Oct 2015 9:23 pm

    Hmmm . . . ??? Close, but he had better prepare for the $20s-$30s in the years ahead as part of the down phase of the Juglar cycle of the debt-deflationary regime of the Long Wave (first conceived by a Russian predecessor, comrade Kondratiev, in the 1920s-30s).

    I’m not paid for consulting for the Russians, but I wish I could (without Vlad the Terrific/Terrible sending me off to a Siberian gulag). 🙂

  4. apneaman on Wed, 21st Oct 2015 9:30 pm 

    VIRAL: A Russian Grandma’s Advice to Obama

  5. BC on Wed, 21st Oct 2015 9:39 pm 

    @dissident, good point.

    Note that The City, Wall St., Frankfurt, Zurich, and Milan have collaborated tirelessly to co-opt Vlad the Terrific/Terrible to bribe him to acquiesce to Russia becoming what Hitler (and The City and Wall St.) wanted Russia to be, i.e., resource colony for the Third Reich (and now the Fourth Reich under Ms. Merkel in Germany), enslaving the “filthy Slavs” for their labor.

    Of course, Putin and the Russians know this and are well armed and endowed to resist and bargain economically and geopolitically in the region.

    Putin and Russia are anything but an “enemy” of the West; rather, the West is well advised to court and placate Putin and Russia as a knight in the last-man-standing geopolitical chess game for the remaining resources of the planet between the West/Russia and China.

  6. GregT on Wed, 21st Oct 2015 10:14 pm 

    “Putin and Russia are anything but an “enemy” of the West; rather, the West is well advised to court and placate Putin and Russia as a knight in the last-man-standing geopolitical chess game for the remaining resources of the planet between the West/Russia and China.”

    Completely agree with this statement. The geopolitical strategy of the last century was control over Eurasia, which happens to be half way around the world from us, and on the same landmass of both Russia and China. The new great game will not be won by the West. The time for playing games is over. The time for diplomacy and cooperation is now.

  7. Plantagenet on Wed, 21st Oct 2015 11:03 pm 

    I very much doubt that oil prices will stay near $50 “for years”. If theres one thing we should’ve learned about oil prices over the last few decades its that oil prices can do surprising and unexpected things.

    The only reason we’re at $50 now is that the world is in an oil glut. All it will take is a slowdown in the US shale TOS biz tø end the oil glut, or a pullback in KSA oil production. Alternatively, the entry of Iran into the global oil market after sanctions are dropped may make the oil glut much worse, with prices headed down to $30 or lower. Or KSA may bumble into an war with Iran, sending oil prices much higher.

    I’ll bet $50 that oil prices won’t stay at $50 “for years” as so many now believe.


  8. GregT on Thu, 22nd Oct 2015 12:08 am 

    “If theres one thing we should’ve learned about oil prices over the last few decades its that oil prices can do surprising and unexpected things.”

    Unexpected things like going up, and down, for no apparent reason other than whether there is an oil glut, or not. Simple, really.

  9. shortonoil on Thu, 22nd Oct 2015 6:56 am 

    Like an iron bolt rusting in the weather, or a boulder on a mountain side that rolls down hill the petroleum production system has to eventually decay from the effects of entropy production. Are the Russians aware of this inevitable outcome dictated by the laws of physics? Of course they are! Russia harbors some of the best scientific minds in the world.

    “Replacing imports with domestically produced Russian goods after the government banned food from the European Union and the U.S. “have begun to work,”

    Russia is making it very well known that she is preparing for what is to come. She is looking to locally maintain herself, as the West’s unsustainable, globally expansive empire comes unraveled. Russia knows that to secure her borders, and her civilization all she has to do is wait!

  10. Davy on Thu, 22nd Oct 2015 7:47 am 

    Yea, Short, the only problem is Putin and his grand ambitions. I see a mixed bag in Russia. I would also say they have a scary wait for when and if the 1.5Bil Chinese move north. Every country has a mixed bag of comparative advantages and disadvantages. Russia is one of the better placed that does not mean they will not fuck it up with a megalomaniac like Putin. I am not saying Putin will not succeed at his goals. What I am saying is he is taking a gamble. That gamble is a gamble the average Russian is taking for Putin. He is a better leader than anything the US has to offer if he can restrain his ambitions.

  11. shortonoil on Thu, 22nd Oct 2015 7:57 am 

    Its a long cold walk from Beijing to Moscow!

  12. makati1 on Thu, 22nd Oct 2015 9:43 am 

    Short, perhaps someone doesn’t realize that Moscow is 3,600+ miles from Beijing, IF they go in a straight line across Mongolia and across the Gobi desert. No matter which way the Chinese would go to get to habitable Russia, they have to cross hundreds of miles of desert.

    Siberia is the only way they can get into Russia and not cross a desert. Not a climate friendly place to migrate to. I see some migration, but it will be with Russian knowledge and assistance, if it happens. Better the Chinese stay in China and buy Russian grain and trade for necessities. Time will tell who is right.

  13. Davy on Thu, 22nd Oct 2015 9:53 am 

    Dream on Mak, I thought there was something called climate change. We know Siberia will change and likely be more habitable at least initially. Who knows but we do know China and Asia is so far into overshoot that the worst of the collapse will be there. Billions will have no choice but to migrate. I am not talking Chinese marching to Moscow I am talking north across the boarder in a sparsely habituated land called Siberia. Got it?

  14. BobInget on Thu, 22nd Oct 2015 10:47 am 

    Snagged from another energy board.

    Full disclosure. I don’t own CLB at this time.

    However, Core Labs is IMO, one of the most reliable, unbiased predictors of future oil prices
    of our time.

    The Company continues to anticipate a “V-shaped” worldwide activity recovery in

    2016 with activity upticks starting in the second quarter of 2016. Global

    demand for hydrocarbon-based energy continues to improve, while worldwide crude

    oil supply has peaked and fallen in the second half of 2015 and will continue to

    do so for the remainder of the year. U.S. production continues to fall from its

    peak in April 2015 and the Company now believes production could fall by over

    700,000 barrels of oil per day (“bopd”) from that peak by year-end 2015.

    Internationally, second half 2015 crude oil production is also likely to

    decline. Based on currently available worldwide crude oil production data,

    coupled with internal Core Lab data, Core is increasing its estimate of the net

    worldwide annual crude-oil production decline curve rate to 3.1% from 2.5%. The

    further decline by 60 basis points is due to sharper decline curve rates for

    tight oil reservoirs and the significant decline in maintenance capital

    expenditures for the existing crude-oil production base.

    At current North American activity levels, Core predicts 2016 crude-oil

    production to be lower year-over-year; perhaps falling over 900,000 bopd in

    2016. This, coupled with the continuing decline in international production and

    continuing increase in global energy consumption, should create a tight crude

    oil supply market, and that should lead to increased crude prices and industry

    activity levels worldwide.


    If Core numbers are accurate the shortfall in terms of global supplies in 2016 will be substantially larger then what I am expecting, for the US I am expecting a 600K decline in 2016, however CLR is pointing to 900K decline. If prices do rebound in 2H-2016 we may end up with a decline that is closer to my number. Most importantly, I find their 60 basis points increase in the net decline rate to 3.1% (this is after infill drilling) extremely important. At 3.1% net decline (or managed decline) from existing fields in addition to 1.3m expected growth in demand translate into 4.3m barrels of new production the needs to come from new projects, this compares to 3.7m using their previous 2.5% net decline rate. Such subtile yet crucial data point is completely ignored by the media. While traders are fretting about a handful of million barrels in the EIA weekly oil storage report, CLR just removed 219m barrels from 2016 supplies due to accelerating decline rate (something that I have touched upon before on BRY)


  15. joe on Thu, 22nd Oct 2015 10:55 am 

    As the plant said, oil prices are weird, what is certain is that tight oil is risky and low returns on investment will limit it’s impact, if anything it should ensure that tighter oil exploration like deep Arctic are just pipedreams.

  16. BobInget on Thu, 22nd Oct 2015 11:00 am 

    Oh, Those that were too young during the Cold War may lack experience needed to fully understand Russian propaganda.

    Russia along with allies or conspirators, call Iran, Iraq, Venezuela, Algeria, Ecuador etc what ever you want, have dedicated serious resources to overthrowing the Saudi regime.

    That boys and girl is what makes the oil bidness and all its machinations so damn fascinating …

  17. BobInget on Thu, 22nd Oct 2015 11:06 am 

    Anyway, it’s high time to take your eyes off oil and pay more attention to natural gas.

    North America has an embarrassment of NG wealth.. Not riches mind you, wealth..
    We have more then enough gas to last out mankind’s current planetary residency.

  18. joe on Thu, 22nd Oct 2015 11:10 am 

    So a 50% reduction in profit for OPEC is a big conspiracy by members and non members of OPEC to overturn the Wahabbist Saudi regime (a plan which also includes Saudi because they increased production btw)? Not fraking, that’s nothing important?

  19. BobInget on Thu, 22nd Oct 2015 11:17 am 

    Some interesting points out of the HAL CC
    1)Dave Lesar – Chairman and Chief Executive Officer

    “In my 22 years in this business, I’ve never seen a market where we’ve had less near-term visibility. In reality, we are managing this business on a near real-time basis, customer-by-customer, district-by-district, product line-by-product line, and, yes, even crew-by-crew”

    “Now, there obviously are a number of moving parts in North America, and I’m not confident enough yet to call the exact shape on this recovery. But we do expect that the longer it takes, the sharper it will be”

    2) Jeff Miller – President

    “Thanks, Sean. If we look at the amount of horsepower that’s idled right now, just on the side lines, about half of it is on the sidelines today in terms of stacked equipment. And that’s equipment that’s not getting any maintenance, and it’s being cannibalized for parts.

    The other factor that we see now, service intensity continues to increase actually on a per well basis. And so, that’s yet again harder on the equipment that is working. So if we look at what’s stacked today, we think about half of that equipment stacked today will not be ultimately serviceable”

    Core Labs said very similar things on their second quarter call.

    IMO when the turn comes in the latter part of 2016 service pricing may go up
    rapidly. The lack of equipment and servicing of that equipment is going to reduce
    the equipment available. Secondly, with an improving economy hiring crews is
    going to be a bigger problem than in the past.

    The oil price needed to be profitable or at least C/F positive will be rising
    on a continuous basis. Something WS does not understand. (30)

    poster’s note:

    The following link should be of interest to anyone intending to live into 2016 and beyond.

  20. BC on Thu, 22nd Oct 2015 5:42 pm 

    @Bob: We have more then enough gas to last out mankind’s current planetary residency.

    Charming, Bob. At what growth rate of consumption and cost of scale of transitioning civilization while we attempt to grow real GDP per capita and sustain the rest of the fossil fuel infrastructure indefinitely?

    Will there be any entities left to profit from producing nat gas under post-Peak Oil and LTG conditions?

    Math and thermodynamics/exergetics suggest an unequivocal no.

  21. Davy on Thu, 22nd Oct 2015 6:34 pm 

    BC, Bob is a decent cornucopian. I think he gets emotional sometimes with his economic projections. Increasingly his cornucopia not comments show desperation. This is especially true since his beloved Chinese growth engine sputtered. I am thinking he is a caterpillar ready to molt into a beautiful doomfly.

  22. shortonoil on Fri, 23rd Oct 2015 6:44 am 

    “However, Core Labs is IMO, one of the most reliable, unbiased predictors of future oil prices of our time.”

    They don’t have a model that can reproduce oil prices back 60 years with a 4.5% margin of error, and they didn’t predict the largest price drop in history six months in advance.

    We did!

    But apparently the in your face obvious is not very obvious to some people. The term “blinder than a bat” comes to mind?

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