Oil prices topped $70 a barrel for the first time in three years on January 11, pushed up by the Opec+ production cut deal that reduces global output by 1.8bn barrels per day.
The price is the price needed for Russia’s budget to balance, down from the boom year’s breakeven price of $115. The Russian government has been actively look for new revenue sources and a round of belt tightening has reduce the breakeven price and is expected to reduce it further to around $40 in the coming years.
The price of Brent futures in London rose 1.2% on January 11 to its highest level since December 4, 2014, according to Bloomberg.
While both Russia and Saudi Arabia, the two biggest individual producers, will be happy to see oil prices rise and so take pressure off their budgets, the rising oil makes more US shale producers profitable, encouraging them to increase output, therefore acting as a natural cap to oil prices.
US output is likely to exceed 10mn barrels a day as soon as next month and top 11mn before the end of 2019, according to Energy Information Administration forecasts, reports Bloomberg. Russia’s production is also currently at 11mn barrels a day. US gas production is also soaring and the country now produces more gas than Turkmenistan, one of the biggest producers in the world. This year the US is expected to go from a net gas importer to a net exporter.