Kremlin refuses to recognize the fall in oil prices as catastrophic
The sharp fall in world oil prices, after the OPEC members failed to agree on the extension and expansion of the deal, cannot be considered a disaster for Russia, Russian presidential spokesman Dmitry Peskov told journalists.
“This is a very unpleasant price situation. We do not agree that in the medium term this is disastrous for Russia ,” the Kremlin representative said, responding to a request to comment on the words of LUKOILs vice-president Leonid Fedun, who in an interview with RBC news agency called the fall of oil prices below $25 per barrel “catastrophic”.
Peskov also said that “there were times when the price of oil was even lower.” At the same time, he noted that Russia has a “solid reserve of strength” and this will ensure the fulfillment of all social obligations. The U.S. oil sector, according to the president’s spokesman, is already in “distress” as shale oil producers suffer from falling prices.
The price of a barrel of Brent crude oil collapsed by 24.1% on March 9, and on March 18, it fell below $25 for the first time since May 2003. Thus, in less than two weeks the barrel of Brent fell in price by more than 40%, and since the beginning of the year – almost three times (on January 8 oil was traded about $72 per barrel).
On March 18, the price of Russian Urals oil, which traditionally trades at a discount to the price of Brent, fell below $19 per barrel.
However, on March 19, the price of a barrel of Brent rose by more than 14%, rising above $28, and on March 20 went above the mark of $30. At its peak on Friday, it rose to $30.67. Even then, however, the price of oil remains well below the Russian budget cut-off price ($42.4).
During the week, the Russian Central Bank made a series of interventions into the currency market, selling almost 33.4 billion rubles of foreign currency reserves. These sales are carried out as part of the Finance Ministry’s directive after the price of Urals oil fell below the cut-off limit set out in the 2020 budget.
The situation is exacerbated by the COVID-19 coronavirus pandemic. The head of the Russian Finance Ministry Anton Siluanov called the coronavirus a threat bigger that the fall in oil prices. According to the minister, the pandemic has a negative impact on entire industries, because “all sectors of the economy are shrinking.”