Russia might be forced to close some oil production

Low oil prices for longer forced the Russian government to cut its budget and might even lead to a cut in oil production, government officials said on Wednesday.

Speaking on Wednesday at the Gaidar forum in Moscow, the country's Finance minister, Anton Siluanov, said the Russian Federation's budget would only be balanced with the price of oil at $82 per barrel, let alone the approximately $30 per barrel at which it was trading.

On the assumption for this year's budget of oil at $50 per barrel the public deficit had been expected to reach 3% of gross domestic product, following a shortfall of 2.6% in 2015.

In parallel, prime minister Dmity Medvedev said the budget would have to be revised should oil prices fall further.

The first step in that direction had already been taken, Siluanov added.

A month ago the Kremlin ordered spending cuts, although public sector pay and pensions would be spared from the axe.

The tough situation facing the country was underlined by remarks from the deputy finance minister, Maxim Oreshkin, who reportedly said Russia might be forced to close some of its production.

Climatic conditions in Russia's nothern regions, where many producers are located, and the conditions at some oil fields makes it technically difficult to lower and raise production quickly.

"We’re preparing a stress test scenario in order to be ready for any unexpected situation… We’re even preparing calculations based on the level of up to $25 per barrel," Economic Development Minister Aleksey Ulyukayev said in an interview aired by the Rossiya-24 TV news channel, TASS reported.

"For commodity-based economies such as Russia … the period of low commodity prices will be very long. I find it difficult to judge whether it’s the era of global commodity cycle or simply a new pattern. But I’m convinced that this is [going to be] a very long period of time," Ulyukayev added.