The Central Bank has predicted oil at $40 within the next three years


A new baseline scenario of the Bank of Russia assumes an average price for Brent oil at $40 a barrel before the end of 2017, said the head of the Central Bank Elvira Nabiullina at a press conference following the meeting of the Board of Directors on Friday, June 10. The previous baseline scenario of the Russian economy, the Central Bank, published in mid-March, based on the average annual forecast for oil at $30 per barrel and a “very slow recovery to $40 per barrel in 2018.

Despite the fact that the regulator has improved the forecasts for oil prices, he is still waiting for their decrease from the current level. “We consider as the underlying trajectory of movement of oil prices to $40 per barrel by the end of the year, and the average annual price of oil at $38 per barrel in 2016. We are quite conservative, much more conservative than most forecasts and the consensus forecasts, and we believe this is justified”, — said Nabiullina. According to forecasts of the Bank of Russia, oil prices will remain near $40 a barrel in the next three years.

According to Nabiullina, the growth of prices in April and may was largely linked to temporary factors, including “supply disruptions and excessive optimism in world markets”. Since early April, oil prices rose more than 30% — from $39.7 to $52 per barrel. Among the factors that contributed to the increase in oil prices, the International energy Agency called the potential actions of the oil producers to control production, interruptions in oil supplies from Iraq, Nigeria and the UAE, as well as signs of a decline in oil production by countries outside OPEC, and the dollar oslablenie.

In the risky scenario, the Bank of Russia ensures the forecast of the average annual price of oil at $25 per barrel, but estimates the probability of this scenario as low — “lower than after the last meeting,” said Nabiullina.

In the baseline scenario, the Central Bank lays the possibility of purchases of currency reserves on the market. “We are in our base-case scenario by not including this possibility until the end of 2018, but will continue to monitor the situation. In the calculations still do not exist”, — said Nabiullina. The last time the Bank of Russia went on foreign exchange market to purchase foreign currency in the reserves in the summer of 2015.

While foreign exchange reserves, according to forecasts of the Bank of Russia, by the end of 2017 will grow by $22 billion, due to the fact that the banks will return the funds received on transactions of foreign currency refinancing. “We proceed in our calculations on the assumption that before the end of 2017 debt operations foreign currency REPO to the Bank of Russia will be extinguished. In this regard, foreign exchange reserves will grow by 15 billion rubles in 2016, and another 7 billion rubles in 2017”, — explained Elvira. The situation on the currency market comfortable, and the tool is already unclaimed, she added. According to the Central Bank, international reserves at may 13 was $390,9 bn, with the beginning of the year they increased by 5.2%.