Supply and demand for oil should balance out in late 2017 and pave the way to market recovery, Russia's oil minister said. File Photo by Calin Tatu/Shutterstock
MOSCOW, Dec. 21 (UPI) -- Only when crude oil markets balance out in the second half of next year can major players starting talking about market recovery, Russia's oil minister said.
An agreement by members of the Organization of Petroleum Exporting Countries and non-member states like Russia to cut production starting in January is aimed at erasing the supply-side strains that pushed oil prices to below $30 per barrel early this year.
Crude oil prices have shot up considerably since the November agreement was brokered, holding steady in the mid-$50 range. Russian Energy Minister Alexander Novak told state broadcaster Rossiya-24 that crude oil prices could make a run at $60 per barrel, but it's unlikely they'll move much higher soon.
"It is unlikely that we will see price increases to a level that was in 2014, which was more than $100 per barrel," he said.
Russian President Vladimir Putin said this week next year's budget was based on oil priced at around $40 per barrel.
OPEC's agreement outlines a production cut from Russia, though the latest figures find Russian crude oil production growth is expected to show up in full-year 2016 figures. OPEC said it expects Russia to produce an average 11.1 million bpd next year, against the estimated 11.05 million bpd for 2016.
Novak nevertheless said supply-side pressures should ease moving into 2017.
"According to our estimates, this surplus could go away in the end of 2017, the third or fourth quarter," he said. "Then we can talk about market recovery."
On compliance, the minister said there's no reason to believe any of the parties to the agreement, including the non-OPEC members, would violate the terms of a deal that sidelines about what OPEC expects in global demand growth next year.
Novak last week said representatives from 12 oil companies in the country agreed to work together to monitor the terms of an agreement to cut oil production during the first half of next year. Members would meet twice a month to ensure the "terms are equal for everyone."