Oil flows to the deficit

The price of Russian oil Urals fell to the values ​​of the beginning of the year, fixing below 4 thousand rubles. per barrel. Since the beginning of the month, oil has fallen in price by 17%, which was primarily due to falling prices on the world market. If ruble prices remain at the current level until the end of the year, the budget may turn from a surplus into a deficit. This will force the authorities to weaken the ruble, which, combined with the restoration of imports, will return the dollar to 70–80 rubles/$.

In August, the ruble value of Russian Urals oil returned to below 4,000 rubles. per barrel. By data Profinance.ru, at the end of last week, the cost of oil fell to 3.65 thousand rubles. per barrel, this year’s low. Even taking into account the correction on Wednesday, August 10, it remained near 3.9 thousand rubles. per barrel, 17% lower than the end of July.

A significant drop in the cost of oil is associated primarily with a decrease in prices on the world market.

By data Investing.com, European Brent oil fell to $97 a barrel on Wednesday, almost 2% lower than the previous day’s close. By the close of trading, although the price rose to the level of $100 per barrel, it remained 7.5% lower than the end of July. By data Profinance.ru, the cost of Urals has decreased since the beginning of the month by 14%, to $65.3 per barrel.

According to Mikhail Sheibe, commodities strategist at SberCIB Investment Research, the decline in prices is due to market participants rethinking the supply shortage factor, which in the first half of the year provoked prices to rise to historical highs, and growing concern about risks on the demand side. In the second half of the year, he expects oil prices to remain at current levels. “The situation on the market will depend on the degree of supply shortage, and the most pressing issue will be the prospect of global demand against the backdrop of a sharp increase in rates and recessionary trends,” Mr. Scheibe notes.

Keeping the ruble price of oil at current levels will gradually lead to a budget deficit.

So far, the average cost of Russian oil since the beginning of the year has amounted to 6.1 thousand rubles. per barrel, which is almost twice as high as the budgeted value (3.2 thousand rubles). By data Ministry of Finance, oil and gas revenues for seven months amounted to 7.1 trillion rubles, and at the end of the year, according to evaluation Management Company “Raiffeisen Capital”, will reach 11-12.3 trillion rubles. However, the budget surplus of the Russian Federation in January-July has already fallen below 0.5 trillion rubles. “In autumn, the budget will be in a small deficit, and in December the cumulative deficit will increase to 2.3 trillion rubles,” said Mikhail Vasilyev, chief analyst at Sovcombank.

At the same time, low Russian oil prices have a moderately negative impact on the ruble, as the Russian current account surplus remains impressive. As a result of trading on Wednesday, the dollar exchange rate on the Moscow Exchange rose by 0.5 rubles to 60.7 rubles / $, returning to the levels of closing in July. “Demand for the currency remains subdued due to the slow recovery of imports, severe restrictions on the movement of capital and the de-dollarization policy pursued by the Bank of Russia, commercial banks and other financial institutions,” Mikhail Vasilyev notes.

However, in the second half of the year, in the event of a further decline in oil prices, the impact of this factor on the ruble will increase.

According to the head of the analytical department of Zenit Bank Vladimir Evstifeev, against the backdrop of a decrease in budget filling with income from the sale of energy resources, the financial authorities may tighten their rhetoric regarding the need for a weaker exchange rate of the Russian currency. “Achieving a weaker ruble in the medium term can be achieved through the introduction of a modified budget rule,” the expert notes. Additional pressure on the exchange rate of the Russian currency will come from the recovery of imports, a further reduction in the key rate, and easing in capital restrictions for friendly non-residents. Under such conditions, according to Mikhail Vasiliev, the dollar exchange rate may rise to a more comfortable 70–80 rubles/$.

Vitaly Gaidaev