"If Russia and Saudi Agree on Production Cuts, Oil Prices Will Reach $40 per Barrel"

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] There is a forecast that if Russia and Saudi Arabia agree on crude oil production cuts, oil prices will quickly rebound to $40 per barrel based on West Texas Intermediate (WTI).

Hwang Seonghyun, a researcher at Eugene Investment & Securities, said on the 4th in a report on positive factors for the international oil price rebound, "since the international oil price fell to $20.3, positive news for the oil price rebound has been continuously emerging."

He cited "China's strategic petroleum reserve purchases, US President Trump's remarks on intervening in the Russia-Saudi production cut agreement, Russia's postponement of production increase, and the bankruptcy of US shale company Whiting Petroleum" as examples. China's strategic petroleum reserve is about 1 billion barrels, exceeding the US purchase plan (77 million barrels) by three times, and Russia's postponement of its planned production increase is expected to lead to a supply reduction of 300,000 to 500,000 barrels.

He also emphasized the importance of Trump's remarks coming after the bankruptcy announcement of the US independent E&P company. Researcher Hwang explained, "Whiting Petroleum's oil production accounts for only 1% of the production of 42 independent E&P companies, but production cuts by small and medium-sized E&P companies could follow one after another."

He analyzed, "The fiscal breakeven oil prices for Russia and Saudi Arabia are $48 and $83 respectively, making it difficult to tolerate the current oil prices in the long term. With the bankruptcy announcements of US E&P companies and considering bond repayment schedules, US intervention may accelerate, and supply adjustments could occur earlier than previously expected."