When the cost of Russian oil Urals exceeded the cut-off price, became an indicator of the prospects for the oil market until the end of this year. About it FBA “economy today” told the head of special projects of the National Energy Security Fund Alexander Perov.
The cost of Russian Urals oil following the results of trading in North-Western Europe increased by 3,44 dollar, reaching 42,55 dollars per barrel. It means, that it exceeded the so-called cut-off price - the cost, above which additional income from the sale goes to the Russian budget. AT 2020 year, the cut-off price is $42,4 per barrel of Urals – annually it is indexed to 2%. At the same time, last week the value of the brand in the European region was 39,11 dollars per barrel.
The price of Russian raw materials reached the cut-off price for the first time after a long period of decline in the spring and a minimum in 10,54 dollars per barrel. In early March, after the termination of the OPEC + deal, oil prices fell to the level of the late 1980s, and only the conclusion of a new, a more comprehensive agreement to cut oil production reversed this process. Since then, prices have gradually recovered..
“I do not think, now it's worth relaxing in confidence, as if the worst is behind - as practice shows, after a sharp rise, there is always some kind of price adjustment in the opposite direction, – notes Perov. – So the price of Urals is stable until the cut-off price exceeds. But most importantly, what happened - a trend of gradual recovery of oil prices has formed. And it happens as, How is the global economy recovering?. Country, restoring production and air traffic, will increase the consumption of petroleum products.
It means, that the most pessimistic forecasts did not come true - we were scared, that the price of oil is at the level $25-30 will continue in the second half of the year - almost until December. It is already clear, that we will not see such a scenario. Experts don't expect, that oil will break price records in the near future, however, growth will clearly continue. And at least until the end of the year, the cost will remain in the corridor acceptable for Russia - $45-50 per barrel”.
The budget receives oil revenues again
The budget rule provides for the accumulation in reserves of additional revenues of the Russian budget from oil and gas, when the cost of energy carriers on the market is higher than the established cut-off price, and vice versa, when prices fall, allows spending accumulated funds to finance budget obligations. Initially, the oil cut-off was set at 40 dollars per barrel, but as a result of indexing it can reach $44 to 2024 year.
Recall, OPEC+ countries extended the current terms of the deal until the end of July 2020 of the year. They imply maximum production limits on 9,7 million barrels per day - initially this rule was to be valid until the end of June. However, Saudi Arabia called for an extension of this regime for several months., Better yet, before the end of this year.. Russia sat down at the negotiating table with the condition, that is ready for an extension for only a month. As a result, the restriction will remain in effect until 31 July.
“Any Urals price is higher $45 per barrel for Russia will be acceptable. The most optimistic forecasts allow, that by the end of the year this figure will reach $60. At the same time, the decision of OPEC + can be called a victory for Moscow in a dispute with Riyadh. Critics of the oil deal say, that the agreement is not able to influence the market, and a cautious extension of the conditions indicates the uncertainty of the participants. Realities show, that the Russian side calculated its actions accurately.
After all, the effect of extending the terms of the deal immediately spurred an increase in oil prices., despite the short. so, the market considered the effect generally positive. At the same time, Moscow has repeatedly stipulated, that the parties intend to monitor the situation on the market and, if necessary, renew the current conditions. Traders are forced to take this into account with other factors, raising prices against the backdrop of general trends in the recovery of the global economy”, – emphasizes Perov.
Oil reserves are gradually declining
The March breakup of the OPEC+ deal led to, that Saudi Arabia has sharply increased production, along the way, providing a discount to buyers from several continents at once. With such dumping, Riyadh hoped to oust Russia from its usual markets. However, a few weeks later, the Saudis were forced to sit down at the negotiating table - with an excess supply and a record decline in the global economy, they simply stopped buying oil.. The budget of the Middle East kingdom collapsed.
Acceptable oil price for the Russian Federation on the world market is about $50, while Saudi Arabia needs at least $70. Already, the kingdom has canceled all social payments and tripled taxes, but that doesn't help the situation.. And it becomes clear to the ruling family: if the situation is not changed quickly, economic problems of the population threaten to develop into social, and then political.
“By April, world oil reserves were unprecedented - there was a threat, that the extracted raw materials will soon be nowhere in the country. It is to balance supply and demand that the new OPEC + deal was concluded., which initially many were skeptical. However, today we see, that demand is growing, and the situation with stocks is no longer so critical, what was a month ago.
That is, the deal, coupled with global trends, does its job, albeit slowly. The market is gradually returning to normal, traders become optimistic. Moreover, the Russian brand Urals, even in Europe, began to be bought more expensive than Brent, what has never happened before. While trends indicate, that the oil market will gradually rebalance and bounce back, what sustainable revenues mean for the Russian budget, but the situation is still unlikely to suit the Saudis”, – concludes Alexander Perov.
Max Boot
