Page 14 - FSUOGM Week 24

FSUOGM PERFORMANCE FSUOGM

Russian Urals oil back to break-

even $42 mark

RUSSIA RUSSIA’S federal budget is back to the equilib- be at $44-47 per barrel. Some analysts see the
rium threshold as the Urals blend oil prices have adjusted price being as high as $50 per barrel.
Urals sank to as low as reached $42 per barrel set in the budget rule, From March to June the Central Bank of
$12 per barrel back in RBC business portal reported on June 9. Russia (CBR) and the Finance Ministry have
April. Back in April Urals dropped to as low as acquired about $6.2bn off the market. As of June
$12, while oil prices even briefly turned nega- 1 the liquid part of the NWF stood at $116bn,
tive, amid a global slump in demand. Consist- with another $10bn of government’s Fx reserves
ently low oil prices would undermine Russia’s on CBR accounts.
fiscal position and risk quickly exhausting the Should Urals price be maintained at above the
National Welfare Fund (NWF). threshold on average for one month, adjusted for
But as the oil price is again above the $42 set the lower than planned oil output and exports,
in the budget rule, the NWF might start to be the Finance Ministry would have to start replen-
replenished again through currency purchases ishing the NWF by buying the currency off the
off the market by the Finance Ministry. market and transferring it to the NWF, in co-or-
As reported by bne IntelliNews, to finance dination with the CBR.
the fiscal stimulus amid the unprecedented It is also unlikely that the Urals price will be
double shock of the coronavirus (COVID-19) maintained at above the budget rule threshold
pandemic, as well as to cover the missing oil without fluctuation until the end of the year, thus
and gas revenues, the ministry planned to tap securing the budget from lower oil revenues and
RUB2 trillion ($29bn) from the NWF, as well as the need to tap into the NWF.
to expand borrowing in the domestic ruble OFZ Russia’s Ministry of Economic Development
bond market. has a conservative outlook of an average price of
Analysts surveyed by RBC portal said that as $31.1 per barrel for 2020. RBC cites studies by
Russia has committed to cutting oil output under Goldman Sachs and Morgan Stanley that warn
the OPEC+ deal, the actual cut-off price for the that demand for oil will remain depressed at least
budget adjusted for lower output would have to until the end of 2021. ™

P14 www. NEWSBASE .com Week 24 17•June•2020