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Putin downplays impact of oil price drop
November 29, 2014, 4:49 am

Ministers of the OPEC decided on Nov. 27 to maintain its output level of 30 million barrels a day despite crude oil price falling to a four-year low [Xinhua]

Ministers of the OPEC decided on Nov. 27 to maintain its output level of 30 million barrels a day despite crude oil price falling to a four-year low [Xinhua]

President Vladimir Putin on Friday played down the oil price drop, saying it would not last and would not damage long term projects for oil companies in Russia, the world’s biggest producer which has budgeted for $100 crude.

The oil price plunge is an inevitable market response to the expected decision by OPEC to maintain its current output quota of 30 million barrels a day, said Putin.

“We took part in the OPEC meeting. It was absolutely clear for us that the market will react to OPEC’s announcement to maintain output,” Putin said.

Russia was not surprised with OPEC’s recent decisions of not cutting oil production quotas, Putin told the meeting with the visiting top managers of French oil giant Total.

Ministers of the OPEC decided on Nov. 27 to maintain its output level of 30 million barrels a day despite crude oil price falling to a four-year low.

“No major energy resources producers insisted (during the OPEC meeting) on any special measures to adjust the prices, including Russia. We are, in general, satisfied with and see nothing exceptional in that,” said Putin.

According to Putin, the world oil market will stabilize in the first quarter or in the middle of 2015.

Russia’s 2015-2017 budget is based on an average oil price of $100 per barrel.

Despite current difficult times for the world energy sector, Russia does not foresee any unexpected developments of the cooperation with Total, Putin stressed.

The Russian President added that Moscow has large-scale projects with Total, such as the gas reserve exploration in Russia’s Yamal Nenets Autonomous District, which “can undoubtedly influence both European and global energy”.

Meanwhile, Total’s new CEO Patrick Pouyanne said that Russian market would remain at the core of the company’s strategy, as Total has invested $10 billion in Russia.

Russian Minister of Economic Development Alexey Ulyukayev also said on Friday that oil prices at about $70 per barrel will have no adverse impact on Russia’s budget.

When the oil price was $110 per barrel and the rouble exchange rate was 32-33 roubles per one US dollar, the rouble-denominated oil price was about 3,600 roubles.

“Its price in roubles is about the same now, when the oil price is 71-72 US dollars per barrel and the rouble exchange rate is 49-50 roubles per dollar – the same 3,600 roubles,” the Minister said.

“For us as a spending unit, for the budgetary system, the rouble-denominated oil price is much more important than the dollar component,” he added.

“For those whose currency is not pegged to the U.S. dollar, recent price drops have been partly offset by swings in foreign exchange rates: thus Russia’s nominal export revenues in roubles inched up lately even as they plunged in dollar terms,” the International Energy Agency said in a report in October.

 

TBP and Agencies

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