Around the axis: where will oil quotes move in the coming weeks
The global stock market reacted instantly to the news background. The stabilization of trade relations between Beijing and Washington had an immediate impact on the black gold price charts. Read about the factors of falling and rising oil prices in the Izvestia article.
News from the States
The foreign policy of countries determines the dynamics of rising and falling prices. Changes often occur rapidly.
The United States and China have agreed to postpone the introduction of mutual protective duties, and oil prices have risen. So far, the influence of this factor prevails, experts interviewed by Izvestia believe.
At the same time, there have been reports of a possible nuclear deal between the United States and Iran, suggesting an easing of sanctions pressure. Due to the expectation of an increase in global supply due to Iranian energy resources, the price chart is moving down.
Meanwhile, the U.S. Energy Information Administration (EIA) reported an increase in oil reserves by 3.5 million barrels. The news caused a natural decrease in prices. Brent crude lost 3.1%, WTI — 3.2%.
The foreign policy maneuvers of the United States of America often have a decisive impact on the oil market, says Olga Orlova, head of the Industry department at the Institute of Oil and Gas Technologies.
— For now, oil prices are being kept from rising by signals from the Federal Reserve that there will be a pause in easing US monetary policy, which will last for some time. The probability of maintaining the rate in the current range of 4.25–4.5% is high. Otherwise, another easing would have caused an increase in oil demand and, as a result, higher prices," she says.
Foreign policy factors
The geopolitical situation in the Middle East, the situation around the Iranian nuclear deal, tariff wars and OPEC+ decisions are what will determine oil prices in the short and medium term, says Finam analyst Nikolai Dudchenko.
In his opinion, the negotiation process between Russia and Ukraine, in the absence of a settlement, will provoke the United States and the EU to new restrictions against Russia. The 17th package of European sanctions, which mainly affect the "shadow fleet", is already ready. However, this situation, oddly enough, will have a positive impact on the oil market.
— A similar situation was observed in January of this year, — the expert reminds. — Then the outgoing Biden administration adopted another sanctions package against Russia, which raised oil prices above $80.
In general, as Dudchenko notes, the situation around the Ukrainian crisis has so far had less impact on the energy market than the events in the Middle East.
The factor of the Russian-Ukrainian negotiations has almost been played out on the market, says Ekaterina Kosareva, managing partner of the VMT Consult analytical agency.
"If a month ago the news about the resumption of the negotiation process stirred up the oil and foreign exchange markets, now market participants are more restrained and expect real solutions fixed on paper with signatures," says the Izvestia interlocutor.
The treasury will not be affected
With oil prices falling by 10%, there are no serious risks for the Russian budget, Ilya Sokolov, head of the Budgetary Policy Research laboratory at the Institute of Applied Economic Research at the Presidential Academy, is confident.
— Of course, a 30% drop is another matter. But even in this case, the main thing is not the depth of the drop at the moment, but the speed of price recovery. If oil prices decrease by even 30-50% for 1-2 months, but then a rapid recovery occurs, then this is not critical for the budget," he notes.
Nikolai Dudchenko agrees with him.
— The budget rule continues to apply in Russia. If the price falls below the cut-off price, the Ministry of Finance spends funds from the National Welfare Fund. The budget plan has also been amended — the cost of oil has been reduced from $69.7 to $56 for the current year. Accordingly, oil and gas revenues are currently planned at the level of 8.3 trillion rubles (previously 10.9 trillion rubles), the expert points out.
He recalled that the budget deficit plan has been expanded to 3.8 trillion rubles. Thus, the shortfall in budget revenues from energy exports will be partially offset by non-oil and gas revenues.
Forecasts
In May, the price of Brent crude oil is likely to continue to remain in the range of $60-70 per barrel, Nikolai Dudchenko suggests.
"Regarding the three—month outlook, we are moderately optimistic and do not exclude the possibility of a price movement above the $70 mark," he predicts.
The United States is working productively to create conditions for falling oil prices, and a factor such as expanding potential supply will have a long-term impact on the market, comments Olga Orlova. She expects oil prices to consolidate at the level of $55-60.
Ekaterina Kosareva shares her forecast.
— Keeping prices below $60 is already having a positive effect on oil exports from Russia. It sounds paradoxical, but in this scenario, the official chartering of Greek ships with European insurance automatically reduces the cost of using the "shadow fleet" (whose ships periodically replenish the US sanctions SDN list) and opens access to any port in the world, which means it has a beneficial effect on the revenue of Russian oil companies, the analyst points out.
She notes that non—oil companies can fully support the oil sector in terms of export earnings: Russian products, in particular agricultural products, are free from sanctions and are in great demand all over the world, and this has a huge potential.
According to Kosareva, for US oil companies, long-term retention at such levels means working on the verge of survival.
— Shale oil extraction is an expensive and high—tech process. If at some point the support of the federal authorities proves insufficient to carry out full-fledged activities, a repeat of the 2020-2021 scenario is possible, when small and medium—sized oil companies began to go bankrupt one after another," she summarizes.
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