The Central bank of Russia believes that oil will hit $40 by the end of the current year. Do policymakers have a secret Russian Oil price plan?
27 March, AtoZForex – Global oil experts believe that Russia might know something special the world does not know. The Organization of Petroleum Exporting Countries (OPEC) and other oil producers have reviewed the oil cuts. Meanwhile, analysts believe that the central bank of Russia is planning to reach a $40 a barrel.
$40 secret Russian Oil price plan
Reportedly, some of the analysts see that the price of Brent crude will rise by 16% by the end of 2017. However, the oil has dropped 10% in March and that caused turmoil in the market. Additionally, Russia might add to the unrest, according to a number of experts. An emerging-market currency strategist at Rabobank in London, Piotr Matys, has stated:
“The Finance Ministry, the cabinet and the central bank are leaning on the cautious side in terms of their expectations regarding growth, driven still to a large degree by oil. It’s better to be conservative and to be surprised on the upside than too optimistic and end up disappointed.”
Earlier last week, policymakers in Russia have stated that they believe that the Urals will reach an average of $50/bbl in the current year. Yet, they also predicted a drop back to $40 at the end of 2017, with a continuous trend in the upcoming two years. Thus, as the central bank of Russia revealed its forecasts, it also carefully resumed monetary easing. The policymakers have stressed the “uncertainty” in the oil market as the reason for its “conservative” predictions.
Following on this, the Finance Ministry of Russia has highlighted a $40 level in the beginning of the year. That time, the authority has announced that the central bank will commence the purchase of foreign currency on its behalf. This would be done when crude oil exceeds $40 level in order to protect the exchange rate from high volatility. Moreover, the $40 price is being utilized to calculate the country’s budget in the next two years. Is it some kind of secret Russian Oil price plan?
Russia took conservative stance
Furthermore, as black gold’s price rose, Russians tend to stick more to the conservative scenario, as it “leaves room for upside surprises.” A bond fund manager at Aberdeen Asset Management Plc, Viktor Szabo, believes so.
Predicting the oil behavior is a very serious concern for the central bank of Russia. The drop of oil in 2014-2015 has weighed on nation’s economy. That time, the slid in oil prices caused the central bank of Russia to increase the interest rates in an emergency. Moreover, it has led Russia to the crisis.
Even though the OPEC supply cuts have helped the industry to breathe, with oil climbing to $55 a barrel, the central bank of Russia is still worried. Additionally, the correlation between the Russian Ruble and oil has diminished this year. When the crude oil prices dropped below $50 a barrel this week, the Ruble has barely moved.
The oil cartel will not officially decide until May whether it is necessary to extend the deal. Oil might slide back to $40 in case OPEC does not prolong its agreement in the current year, according to some of the market experts.
Think we missed something? Let us know in the comments section below.