He said the recent surge in the market appeared to be part of a commodities super-cycle that the OPEC+ coalition would have to monitor closely.
Sorokin said at an industry conference:
- You're seeing a super-cycle everywhere across the board, not just in oil
- If prices get too high, it leads to demand destruction, which is not healthy
- We have not changed our view that we prefer stable prices, predictable prices, because that is the only way that the economy can plan ahead
The rally has been supported by growth in oil demand from the pandemic recovery, as well as the OPEC+ alliance's continued restraint in releasing supplies.
The producer bloc, co-led by Russia and Saudi Arabia, on Oct. 4 agreed to stick to its plan to raise crude production by 400,000 b/d a month, despite calls from the US and other consuming countries to put more oil on the market.
Sorokin said OPEC+ countries would remain flexible and reactive to market needs, but that the «equilibrium» price was at least $20/b lower.
He said at the Energy Intelligence Forum:
- The current price environment is favorable for...producers, but at the same time we are conducting our analysis and making our decisions based on a significantly lower price band
- In the long run, we expect equilibrium between $45-$60/b, and that's where the market can supply all the necessary demand and ensure that enough resources are being put online to satisfy it, and also where consumers can enjoy a fair price for the energy they need
«We have all the necessary capacity to fulfill these obligations to fully meet these targets», Sorokin said, though he acknowledged that due to the more technical nature of Russia's reserves, it is not as flexible bringing production on- and offline as some of OPEC's core Gulf members.
- We reduced our output back in 2020 after the pandemic started [and] we, of course, have all that reduction of spare capacity
- But beyond that we also need to drill, and we believe we can come close to the target levels that have been announced