In the last few months, the dynamics of oil prices relatively stabilized. From March 2016, when the average monthly price of Brent amounted to 38.7 us dollars. per barrel price will not fall below 42 dollars, and sometimes gotten to pleasing the eye around $ 50. As of 14 September Brent crude is trading at the level of 47.3 USD. per barrel.
Despite this, the Ministry of Finance of the Russian Federation believe that to rejoice the rise in oil prices is premature. The Deputy head of the Ministry Maxim Oreshkin, speaking at the annual Fitch conference on 14 September, said that the state budget for 2017-2019 is typeset with the given average prices of $ 40 per barrel. And this is not the limit. Oreshkin does not exclude that this figure could fall to 30 dollars. per barrel, and the budget in this way will be easier to adapt to a crisis scenario. In this year’s budget assumes the price of 50 dollars per barrel.
“If true negative predictions on the dynamics of the world economy and the oil market will not be anything good. Once again there will be revised forecasts for demand. Stress scenario that we see, then, what you need to prepare is about $ 30. per barrel for the next few years”, — said the Deputy Minister.
As a factor that may lead to negative developments. called the sagging Chinese economy. According to officials in this country have accumulated a huge structural imbalances and has already begun a second wave of capital outflows. “If the growth rates and the collapse of the “bubble” in the real estate market of China will play at the same time, it’s a serious background to a hard landing of the Chinese economy”, — explained the official.
You need to take into account the fact that the Russian budget includes the cost not of Brent and Urals, which is traditionally a little bit cheaper. The average price for Russian oil in January-August 2016 fell by 29% compared to the same period last year and amounted to 39.4 per barrel.
The government is now working to adapt the budget to the new oil reality and prepare him for any shock scenarios. According to Oreshkin, Russia copes with this task better than other developing countries managed to stabilize the ruble and make it less dependent on short-term fluctuations of the oil market, inflation by the end of the year will drop to 5.7%. At the same time, he acknowledged that while the budget is balanced only when the price of oil to $ 80. per barrel. “The good news is that half of the way we have been — dropped from 110 to 80 dollars. Now we will gradually move forward. The task of fiscal policy to make the budget balance at 40-50 dollars,” — said the official.
Earlier it became known that in January-July 2016 revenue from Russian oil exports fell 30 per cent to 39.4 billion dollars. compared to 56.2 billion for the same period last year. And in April, Russian energy Minister Alexander Novak said that Russian oil companies can survive in almost any scenario, as the cost of production ranges from 2 to 15 dollars. per barrel. But if a business does not worry you, it will stand the Russian budget, which has not yet passed a full adjustment, and the economy as a whole, the annual average price of oil at around $ 30 per barrel?
Senior analyst “Alpari” Anna Kokoreva believes that the worst Russian economy is over.
— I think our Department does not exclude crisis scenarios, based on past experience, when everyone considered that oil under any circumstances will not fall to 25 dollars a barrel and all will be well. But after this fall happened, everyone started to play it safe and consider a much larger number of options.
Currently oil is trading in a narrow corridor, and $ 40 per barrel in the baseline scenario is a reasonable mark. Now there seems to be no prerequisites for significant growth, it is unlikely that the price will rise above $ 50 until the end of the year. But there is no reason for a heavy fall. Although you never know.
There are factors that are difficult or impossible to predict military conflicts, the sharp appreciation of the dollar resulting from the fed’s rate hike and so on. Therefore, all options must be considered. But I am of the opinion that the price of oil will amount to 40-45 dollars per barrel before the end of the year. Our economy these indicators can stably operate. Of course, the export revenues will not be as big as we would like, but at the expense of weak rouble it may be compensated.
Even if the oil is slightly more expensive, the budget will still be scarce, because the gap is large enough. But now overall it’s not so bad. Inflation is reduced, the economy’s decline has slowed significantly, activity in the industry and services sectors have unemployment at a stable level. In principle it is possible to say that the economy adapted, and with low oil prices it not only can stay in balance, but also to show some positive results.
If, however, it will fall to $ 30 per barrel, we can say that the recovery of the Russian economy will simply occur at a slower rate.
“SP”: — That is, to a global crisis it will not?
— No, unless, of course, will not happen some unexpected force majeure. All global stresses already experienced. The economy has withstood and oil at 25, so we’ve been through. The most visible consequence of the fall in oil prices will be a new weakening of the ruble. And it will stress not so much for economy as for the population. We only used to more or less stable course in the area of 64 rubles per dollar, but if oil falls below 30, the ruble will exceed the mark “70”. Of course, for the population it will be very unpleasant. But the economy is, by contrast, is not so bad.
“SP”: — When will be able to reach the point of balancing the budget when prices are in the 40-50 dollars per barrel, what was said Maxim Oreshkin?
The Deputy Minister ought to tell us by what have already managed to reduce this threshold. But lowered it due to the fact that you cut costs. Budget sequestration, which should help to adapt to current oil prices is not due to reducing dependence on oil and gas and increased revenues from other areas. Why is the freezing of pension savings and so on? Because there is no money — you have to adapt to the new price of oil. But nobody wants to raise taxes, to stop the outflow of capital, it is easier to reduce costs.
That’s just to reduce them to such an extent that we had a flat budget at 45 dollars per barrel, in my opinion, impossible. You need to oil and gas industry worked and restored. And in the next few years will hardly be possible to achieve serious successes in this direction. Therefore, the assessment of the Deputy Minister seem to me overly optimistic.
The budget problem because it is very dependent on exports. Need to move to settlements in national currencies, to move away from settlements in dollars, increase in the GDP share of other industries, not just oil and gas. And then we will begin to normalize the budget, which will experience such stress when falling oil prices and currency races.
Director of the energy development Fund Sergey Pikin believes that the figures included in the budget is realistic.
— The oil market is still not really balanced. Risks named by the Deputy Minister, is very high. Any negative event can affect oil prices. In addition, the extraction of raw materials continues to not just stay at a high level, but also to grow. So to budget figures above $ 50 per barrel would be quite unrealistic, and 50 under a big question. Don’t forget, we’re talking about Urals oil, and it is cheaper than Brent. Currently the average price of our brand is not up to 40, and it would be good for the year to reach at least this figure.
Therefore, the three-year budget at the rate of 40 dollars per barrel — it’s not even a conservative forecast, but a realistic assessment. $ 45 — this is optimism. And more negative Outlook in the $ 30 doesn’t look so unrealistic. Because if you look at the first quarter of this year, Urals prices fluctuated just at this level.
If the price of oil will in reality be higher, as well, will the money to invest in different stabilization funds.
“SP”: — When will be able to achieve full adaptation of the economy and balance the budget at current oil prices.
Yet it is a question of reducing costs. Ideally, you need to hope that other industries will rapidly grow and replace oil and gas revenues. Now of these industries, the most promising seems agriculture. We have collected a record harvest of wheat, other parameters, too, are developing well. But it is unlikely at this stage, the industry will be able to fully replace oil and gas. It is necessary to stimulate those areas of the economy, which in the future can show growth and provide revenues to the budget.
