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forecast 62.4bn cubic meters. m. The coronavirus pandemic affected sharply reduced global demand for oil and gas consumption in Europe, plus a warm winter factor, which also affected gas supplies.
The Ministry of Finance uses a correction variable to calculate monthly volumes of sales or purchases of foreign currency - the deviation of oil and gas revenues actually received in the previous month from the forecast. This component takes into account the actual volumes of production and export of hydrocarbons. In May 2020, the negative deviation amounted to 58bn rubles. - maximum since 2017, it was in May that the OPEC + deal on a record reduction in oil production came into force. As long as this deviation exceeds the estimate of additional oil and gas revenues, the Ministry of Finance will sell the currency. That is, the effective cut-off price is now above $42.4 per barrel.
The Russians continued to withdraw currency from banks for the fourth month in a row Finance This was indirectly confirmed by the head of the Central Bank Elvira Nabiullina at a Bank of Russia press conference on Friday. True, she made it clear that there would be no advance purchases of foreign currency - by a possible analogy with the sales of foreign currency, which the Central Bank started ahead of schedule on March 10, without waiting for April 7, when these sales were supposed to begin under the regulations. “We, as always, carry out these operations within the framework of the budget rule, based on the instructions of the Ministry of Finance,” Nabiullina explained.
At what price can currency purchases begin
The physical volumes of oil and gas production, as well as export of oil, gas and oil products were supposed to increase, according to the forecasted values of the Ministry of Economic Development, within 1% in 2020, but in the end they will decrease by 7.8–11.2%, says macro-analyst at Raiffeisenbank Stanislav Murashov. “With this in mind, the Ministry of Finance will be able to return to purchasing foreign currency in reserves at an average Urals price above $45.5–47 per barrel,” he estimates.
According to Dmitry Kulikov, deputy director of the ACRA sovereign rating and macroeconomic analysis group, if we assume that the error is 58bn rubles. The forecast of oil and gas revenues of the Ministry of Finance for May is mainly related to the changed volumes due to the OPEC + deal, the order of the necessary price deviation is about $3 per barrel for a month, or $45.4 per barrel.
The effective price for resuming purchases of foreign currency in reserves is about $44 per barrel, estimates Victor Tunev, Managing Director of Agidel Management Company. The authors of the financial Telegram channel MMI believe that currency purchases will begin at oil prices of $46–48.
To resume currency purchases by the Ministry of Finance, the price of Urals should be stable around $50 per barrel, Sophia Donets, economist of Renaissance Capital for Russia and the CIS, presented her assessment at a briefing on June 9 (investment company forecast is $40 per barrel in the second half of the year).
However, the forecast for prices remains uncertain, and it is possible that quotes will again roll back to lower values, without even having time to reach the effective cut-off price in the budget. Goldman Sachs warned June 8 that Brent futures could drop in price to $35 per barrel in the coming weeks (currently trading at $41). Morgan Stanley points out that global oil demand may not return to its pre-pandemic level until the end of 2021. The Ministry of Economic Development has set conservative expectations for Urals for this year - an average of $31.1 per barrel. Few people expect oil prices in the physical market to rise above $50 per barrel this year, which means that
15​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com