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Wednesday, November 22, 2017

“The barrel is gaining momentum”


The beginning of spring has given oil prices a new hope. The price of a barrel exceeds $40 and remains at this level. The main reason is the decline in the U.S. and discussed the meeting of independent producers, including Russia, OPEC. The oil reached the Russian currency. Its official rate on March 10, rose to 72,38 rubles per dollar (+91 cents) and up to 79,44 ruble per Euro (+61 cents). It is likely that this trend will continue until the end of the week the oil will rise to $43, and the dollar will fall to 70 rubles. Moreover, experts believe that in the summer all the same reasons they could throw quotations of raw materials up to $50-60 per barrel. If they remain at this level until the end of the year, inflation will drop to 6-7%, while the budget deficit will remain at 3% of GDP. Per dollar in this case will be given not more than 65 rubles.


photo: Gennady Cherkasov

The end of winter gave oil prices and, consequently, the Russian currency several nice gifts. First, according to the American company Baker Hughes, total rig count in the U.S. last week fell by 13 units, and in annual expression — on 703 units. Secondly, more and more producing countries have expressed their desire to participate in the meeting of the independent producers of “black gold” with the leadership of OPEC. With another such statement was made by the representatives of Azerbaijan. Earlier readiness to attend this meeting spoke both in the countries of the cartel (in Venezuela, Algeria, Nigeria and Ecuador) and not members of the organization States (Oman, Norway and Mexico). Thirdly, the role played and the punters who are already not profitable to play “down”, and they try to throw in some quotes.

For the RUB, such a situation was at hand: the dollar fell to nearly 72 rubles, and the Euro was worth less than 80 rubles.

Experts are optimistic about the nearest future. According to the Deputy Director of analytical Department of “Alpari” Anna Kokoreva, positive data in conjunction with new messages about the upcoming meeting of oil exporters can work wonders. “Brent has all chances to rise to $43 per barrel this week,” — said the expert. “If this really happens, then the “wooden” has a chance to grow to 70 rubles per dollar,” — says financial analyst FxPro Alexander Kuptsikevich.

There are more cheerful forecasts. The analysts of the Agency Bloomberg believe that this summer we can expect the price of a barrel at $50-60.

Agree Russian expert Alexander Razuvaev. The costs of mining oil shale deposits in the USA — $55. Lower prices lead to unprofitable production. Partially leaving the market, the Americans will reduce the surplus. Other producers have said many times, that will cut production (in Russia to refuse production growth, the oil industry promised to Vladimir Putin).

The growth of quotations of “black gold” will bring a lot of benefits. As recently stated by the Central Bank, inflation in Russia by the end of 2016 could reach 8-8,5%. This is not so bad, after all last year the figure was close to 13%. If oil prices a few months will hold in the range of $50-60, the price growth may fall to 6%.

The positive impact felt by the budget. According to Minister of economic development Alexei speaker, the deficit at an average price of $40 will be 4.6–4.7% of GDP. In monetary terms this is 3.6 trillion rubles. If the price of a barrel consistently set to $50, then the budget deficit will stay at 3% of GDP or 2.4 trillion. As planned last year, the Ministry of economic development. If we believe in the best development (quotes of $60), holes in the budget may be even smaller, and may not even have to resort to sequestration.

However, even at $40 a barrel, Russia will survive. Difficult it will be to survive $34, which predicts the U.S. Department of energy. Quotes in the $27-28, which we saw at the end of January, will put our country on the brink of bankruptcy — the budget will not be replenished, and the Reserve Fund will squander it all out. Therefore, even if large exporters of raw materials will not receive the coveted $50-60, the price of $40 will be an occasion to break the Russian economy.

So much will depend on OPEC meeting with other miners. There is preliminary information that it will take place on 20 March. However, not all parties confirm this.

If the meeting takes place, it can expect two results. “First — the negotiations will lead nowhere and contradictions will increase. Then we will have a new price to drop to $30. In another embodiment, the majority of countries agreed to freeze production at the January level. Of course there will be those who will be against. But even this outcome will be positive, and the price of oil will increase”, says Anna Kokoreva.

The Russian currency the first option would move up to 83-85 per dollar and up to 90-93 per Euro. The second option is much better — 65 rubles per dollar. This will benefit both the state and the population. The substitution will still be developing, and consumer demand will remain at a manageable level.

However, for the more expensive “wood” should not count. This level is favorable to the government, as the major revenues consist of taxes on exports. In addition, excessive strengthening of rouble will not allow the Central Bank. The goal of $500 billion in international reserves has not been canceled. With the decline of the dollar and the Euro, the Bank of Russia will start to buy currency that will not allow the ruble to strengthen even more, says Alexander Razuvaev.

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