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The price of Brent oil, which in recent days has been rapidly approaching the psychologically important mark of $100 per barrel, on Thursday only slowed down its growth slightly – November futures on the London ICE Futures exchange traded at $96.24 per barrel.
Passions in the fuel market continue to heat up, and this is being watched with great attention in our country. Oil prices are of great importance for the Russian budget, which still receives a significant portion of its revenues from commodity exports. Moreover, taking into account changes in the exchange rate and adjustments to tax legislation in 2024, the share of oil and gas revenues may even increase (from the current 5.3% of total GDP to 6.4%).
Analysts’ comments note that oil is now becoming more expensive due to data on commercial fuel reserves in the United States published by the US Department of Energy. Last week they fell to 416.3 million barrels (minus 2.17 million) – these are the minimum values over the past nine months.
However, this is only a local reason. A much more long-term impact on the market is having a reduction in supply, which continues to be provided primarily by Saudi Arabia and Russia. Investors’ attention is constantly shifting to the shortage in the physical market, which, as one trader put it, “neutralizes the effects of a reduction in risk appetite.”
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Noting that there are strong market indicators of oil demand exceeding supply, the agency Reuters directly indicates that Brent, which is used to price more than three-quarters of global oil trade, has been rising in price since late June due to prolonged production cuts by OPEC+.
Let us recall that in early September, Saudi Arabia announced the extension of a voluntary reduction in oil production of 1 million barrels per day until the end of 2023. Russia simultaneously extended for the same period an additional voluntary reduction in oil supplies to world markets by 300 thousand barrels per day (Read more in the article “A “strong” final is expected for 2023”).
It seems that such synchronization of actions between Moscow and Riyadh came as a surprise to most Western analysts. “The market is now very tense, almost on the verge of panic,” she told the agency Bloomberg founder of the consulting company Vanda Insights Vandana Hari. What it really comes down to, she said, is concerns about ongoing supply shortages, which in the northern hemisphere could even get worse during the winter months.
At the same time, the West is increasingly saying that measures of economic pressure on Russia have only a limited effect or do not have any effect at all. A clear example here is the notorious “price ceiling” on oil, set by the G7 countries at $60 per barrel in order to reduce the raw material revenues of the Russian Federation. At first, suppliers learned to bypass this restriction, and when the Russian Urals brand broke through the ceiling, the United States de facto put the brakes on all initiatives to “fix” this sanctions instrument, put forward, in particular, by some of the most anti-Russian countries of the European Union.
As a result, the Russian authorities expect to exceed the plan for oil and gas budget revenues in 2023. Finance Minister Anton Siluanov has already stated that this will make it possible to reduce the debt burden on the budget.
It was assumed that this year the Ministry of Finance will need to borrow about 3.5 trillion rubles from bankers and investors, but now this amount will be revised. According to Siluanov, it is absolutely economically justified if, instead of borrowing on the domestic financial market, the state pays its expenses from excess profits from the sale of hydrocarbons.
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If this year the state treasury should receive 8.86 trillion rubles in oil and gas revenues, then in 2024 they are expected to grow to 11.5 trillion rubles, that is, by almost a third. This follows from the Main Directions of Budget, Tax and Customs Tariff Policy for 2024 and the planning period of 2025 and 2026, reports TASS.
So Moscow has no reason to doubt the correctness of the chosen strategy in foreign markets (problems with fuel within the country are another topic). As the press secretary of the Russian President Dmitry Peskov made it clear on Thursday, Russia does not intend to withdraw from the agreements within OPEC+ and is not conducting any conversations with its partners in this organization about increasing oil exports.
Demand for oil in the world remains high, including from China, which continues to be one of the main buyers of raw materials, despite all the talk that the world’s second economy is about to plummet. For the rest of the year, OPEC predicts a market deficit of about 3 million barrels per day, so the prospect of soon seeing a three-digit price per barrel of Brent for the first time since 2013, which Rosbalt previously wrote about, looks quite realistic.
Mikhail Makarov
2023-09-28 18:15:00
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