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Oil to Hit Bottom in 6 Months, Low Prices Unsustainable: Russian Lawmaker

© Fotolia / Ded Pixto Low oil prices are not likely to last indefinitely, the tendency is expected to change within the next six months
Low oil prices are not likely to last indefinitely, the tendency is expected to change within the next six months - Sputnik International
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Chairman of Russia's State Duma Committee of Energy Ivan Grachev stated that low oil prices are not likely to last indefinitely.

We should not forget that the Russian budget still runs a surplus,  Energy Committee chair Ivan Grachev said. - Sputnik International
Speculation, Not Economy Behind Low Oil Prices: Russian Lawmaker
MOSCOW, November 28 (Sputnik), Daria Chernyshova — Low oil prices are not likely to last indefinitely, the tendency is expected to change within the next six months, the Chairman of Russia's State Duma Committee of Energy said Friday.

"The tendency of low prices will not last long," Ivan Grachev said at the round table on oil and OPEC held at the press center of Rossiya Segodnya Information Agency.

"Within the next six months, the situation will change. What will be the lowest price remains in question, but there is no doubt that it is hard to sustain these low prices," he added.

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Vitaly Bushuev, Director of the Institute of Energy Strategy noted that oil prices are determined by psychological factors and media speculation has a large part to play.

"Oil prices are established in the futures market, and by its players who buy and sell paper oil, thus the price depends on psychological effect, not on demand and supply, not on politics or economic," Bushuev said, stressing that media reports have had an important impact on the futures market players.

Speaking at the round table, he also noted that the OPEC's decision not to cut production will not have any impact. And in such a situation, Venezuela and Nigeria have lost the most "because their economies are fully based on oil exports."

"The United States of American also lost," Bushuev said. "OPEC itself lost too, demonstrating that nothing depends on it."

"The winners — this is China and Saudi Arabia," Bushuev said that China is the largest consumer of oil and obviously wins from lower prices.

"Saudis do not want the US to be self-sufficient in terms of energy. They still want to supply oil to the United States. With the prices below $60 the shale revolution will not be economically efficient, so that the US will be forced to increase global oil prices eventually."

Vladimir Feigin, the President of the Institute of Energy and Finance, agreed that that the current slump will continue for half a year.

"It is very likely that the price will continue to fall for another six months and then the normalization can start," Feigin said.

"The situation is really destabilized at the moment. Price formation is no longer linked to the balance, but there is no balance in the market as well," Feigin said underlining the role of speculations in the oil markets.

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