Urals broke through the ceiling – Newspaper Kommersant No. 57 (7502) of 04/04/2023

The cost of European Brent oil has renewed its monthly maximum, having exceeded $85 per barrel. The price of Russian Urals rose by more than 12%, exceeding $60 per barrel. The bullish game was facilitated by the decision of the OPEC+ countries to once again cut oil production before the end of the year. The trend has not yet affected the ruble exchange rate, but has led to a steady increase in the shares of oil companies, which have risen in price by 2.5-3.5% over the day.

The cost of European Brent oil on April 3 for the first time since the beginning of March rose above $85 per barrel. North Sea oil hit $85.72 a barrel on the spot market, nearly 7% higher than Friday’s close, according to Investing.com. Russian Urals, according to Profinance, rose by 12% to $60.6 per barrel, the highest since mid-August. That is, it exceeded the cost ceiling set for Russian oil by the US and the EU.

The update of the monthly high was facilitated by the decision of OPEC +, adopted on Sunday, to reduce oil production by the end of this year by 1.15 million barrels per day (b / d), in addition to the already agreed 2 million b / d. In particular, Saudi Arabia intends to further reduce production by 500,000 bpd.

According to Igor Galaktionov, an expert on the stock market at BCS Mir Investments, the actual level of reduction will be lower and amount to about 1 million bpd, since many countries are underfulfilling their quotas. Considering that Russia has extended until the end of the year the voluntary reduction in production by 500 thousand barrels per day, which has been in force since March, the world oil market will lose 1.5 million barrels per day from May.

The loss of such a volume of oil is guaranteed to lead to a shortage of supplies, which, in conditions of low market elasticity, will cause a further increase in oil prices, experts say.

In particular, Goldman Sachs analysts raised their Brent oil price forecast for December 2023 from $90 to $95 per barrel, and for December 2024 from $95 to $100 per barrel.

Gennady Sukhanov, senior analyst at SberCIB Investment Research, believes that the price of Brent in the second quarter will remain close to current levels, and in the summer, against the backdrop of seasonal growth in demand, it may move into the range of $85-90 per barrel with the potential for growth above $90 per barrel by the end of the year. Analysts admit that in such circumstances the US will have to resort to selling oil from strategic reserves, although they are at the lowest level in 40 years. Igor Galaktionov believes that the US may consider alternative measures such as export quotas and incentives for miners.

However, the rise in oil prices did not support the Russian currency. As a result of trading on Monday, the dollar exchange rate on the Moscow Exchange rose by 1.14 rubles to 78.74 rubles/$, the highest since April 19.

The lack of reaction of the foreign exchange market, says Vladimir Evstifeev, head of the analytical department of Zenit Bank, is due to the fact that the very pricing of the Russian Urals raises questions, since it may not take into account logistics costs.

In addition, on Monday, the Ministry of Finance announced a very low average price of Russian oil in March ($48 per barrel). “This not only looks like a low value, but also insufficient from the point of view of the Russian budget. For the current year, the ruble price of a barrel is set at 4.8 thousand rubles, and with the announced data from the Ministry of Finance, it is 20% lower, even at a dollar exchange rate of 80 rubles,” says Mr. Evstifeev.

However, the rise in oil prices, combined with the weakening of the ruble, had a positive impact on the stock market. The Moscow Exchange Index rose by 0.9% over the day, updating the maximum since the beginning of September 2022. At the same time, the leaders of growth among liquid securities were shares of oil companies: Rosneft, Lukoil, Tatneft, which went up by 2.5-3.5%. In general, the sectoral index of the exchange added more than 1.8%.

With an increase in oil prices, Anna Mikhailova, an analyst at Ingosstrakh-Investments, notes, the degree of reaction of quotations of different oil companies may vary depending on various factors, including under the influence of the share of exports of more premium grades of oil (compared to Urals) and the share of supplies to more premium markets.

Vitaly Gaidaev