Oil Price Forecast for 2020

Today, oil is the energy foundation in the global economy. The oil price is shaking due to fear of oversupply as part of the OPEC agreement and concern in the financial markets. Forecasts by leading analysts confirm the uncertainty and lack of clear benchmarks for oil quotes.

Pricing mechanism

The world oil price is determined by demand, supply and localization of black gold reserves on the planet.

The cost of oil is formed taking into account many factors:

  • OPEC quotas affect the amount of oil, price;
  • Political situation, difficulties with delivery;
  • Emergencies: accidents, weather conditions;
  • Oil demand of the main consumer - USA;
  • The growth or recession of the global economy. During the growth of economic entities, the demand for oil increases;
  • Innovative developments such as electric cars reduce oil consumption.

OPEC

The function of OPEC is to control oil production to ensure regular supplies and maintain the level of prices in the period when demand exceeds supply.

OPEC has 15 states. Russia is not a member of OPEC.

The states are the main buyer of oil, 22.5%, but they are restraining the extraction of raw materials on their territory due to the high cost of work. The United States buys cheap oil from Mexico and OPEC.

Geopolitical Forecast

The period of oil consumption and the well-being of producing countries are limited by the reserves of raw materials in the bowels of the earth, therefore, geological work to find oil fields is regularly increasing.

75% of the world's oil reserves are in OPEC member countries, of which 90% are in the developing countries of the UAE, Saudi Arabia and Kuwait.

In the near future there will be no depletion of oil reserves, deposits are being developed and technological equipment is being used that allows more efficient extraction of raw materials.

The territory of the North Pole is very beneficial for development and has caused controversy about the nationality of Denmark, Canada or Russia. In 2007, to prove the affiliation of the Lomonosov and Mendeleev Ridges to the border of the Russian Federation, Russian oil workers examined the bottom of the Arctic Ocean using the Mir-1 and Mir-2 bathyscaphes from the board of the Akademik Fedorov vessel for 45 days.

Samples of the bottom of the ocean floor showed that this is a continuation of the Siberian platform and the Eurasian continent, and therefore the coast of Russia from Chukotka to Kola

At the bottom of the Arctic Ocean, polar explorers set the flag of the Russian Federation, which caused indignation of the United States and Canada. For the global community of oil producers, this means that the Russian Federation owns a field with a billion-dollar mineral reserve.

Putin's forecast for oil prices

“We need an optimal price for both producers and consumers. About $ 70 per barrel, we are quite happy, ”Putin said.

The budget of Russia for 2018-2020 includes the cost of oil at $ 40, and it is forecasted to be in surplus, the President of the Russian Federation noted.

The President did not comment on the need to reduce oil production, since the budget of the Russian Federation cannot yet be fully formed without taking into account oil revenues.

Today, Brent crude is trading at $ 66 per barrel. “Today's oil price is not very stable, it can go up,” the president said.

Kudrin on the cost of oil

Alexei Kudrin considers it right to set the price of oil at least $ 45 per barrel. Such a cost would make it possible to delay the increase in VAT for 6 years.

In the draft budget for 2019-2021 The price of oil is underestimated by approximately $ 10, Kudrin said. This is for the better, which means in the budget not 2 trillion rubles, but 3, taking into account the actually predicted oil price $ 10 higher.

According to Alexei Kudrin, at a price higher than the fixed price, the ruble will become stronger. Urals crude oil prices:

2019 year$63,4
2020 year$59,7
2021 year$57,9

D. Medvedev's barrage duty to curb rising gas prices

Dmitry Medvedev at the end of 2018 invited oil companies to conclude an agreement on the freezing of gas prices, otherwise he threatened with barrage duties. Barrage duties mean restrictions on oil exports.

However, oil companies asked to raise prices by 5-6 rubles per liter of gasoline inside the market from January 1. Gasoline has risen in price in 36 areas. According to the oil industry, this is because, now 71% of the final cost of gasoline for the consumer is taxes. The remainder of the manufacturing costs. The wage fund is only 2%.

Oilmen proposed the abolition of excise taxes. The cancellation of excise taxes, in addition to making a profit, will create a favorable social and economic situation, revitalize the business.

Since January 1, 2019, the Russian government completed the oil project. By 2024, the export duty will be zero and the tax on mineral extraction (MET) will increase in parallel. It turns out that Russian oil refineries will purchase raw materials at practically world market prices.

To support the refineries, regulate oil shortages in Russia and contain prices, 2 options were prepared:

  1. Refundable excise tax on black gold for refining.
  2. Smoothing excise tax, taking into account the marginality of oil product exports.

Why do all brands of oil equal Brent brand oil

Brent is the main brand of oil traded on world markets. Light in texture, unlike the Russian brand Urals. All brands of oil are based on the price of the Brent brand. Brent has become the benchmark due to the stability of supply and demand.

On January 12, 2018, the price of Brent crude oil for the first time since December 4, 2014 exceeded $ 70 per barrel.

04/24/2018 the price of Brent crude oil increased by 0.39% - up to $ 75 per barrel. Growth was due to political tensions in the Middle East.

The dependence of the dollar on oil prices

When oil quotes fall, the US currency strengthens because mineral exports are traded for dollars. This allows for a collapse in oil prices to restrain the economic crisis in Russia.

Analysts have come up with a formula that demonstrates the ratio of oil and dollar to ruble.

Example:

  1. the cost of a barrel of oil to replenish the budget should cost 3300 rubles (3600, 3000).
  2. To get the amount of oil prices in rubles, you need to multiply the actual oil price by the actual dollar exchange rate.
  3. It turns out the cost of a barrel in rubles.

With lower oil prices, the ruble falls next. The dollar is growing. Therefore, with the decline in oil prices and the growth of the dollar, the Russian budget replenishes within the normal range, since the cost in rubles is profit in dollars. But a weak ruble leads to internal inflation and, with a significant collapse, leads to an economic internal crisis.

Dollar rateOil quotes
$85$27
$64$50

To calculate the dollar exchange rate, the cost of a barrel in rubles should be divided by the current value of oil.

A dollar / barrel pair is tied, a weakened dollar always increases the price of oil.

The dependence of the pair oil-ruble

Rising oil prices strengthens the ruble. But in addition to oil, the ruble is affected by external and internal economic and political situations:

  • With the introduction of sanctions against Russia, even with the high cost of oil, the ruble is weakening. For example, due to the withdrawal of capital by foreign investors from the Russian Federation;
  • The budget of the Russian Federation is structured in such a way that, at a certain level of oil prices, the Ministry of Finance invests part of the income received in American currency to control the ruble exchange rate. Such a mechanism is launched when the price of black gold falls, the Russian Federation ceases to buy currency, sells, that is, demand decreases and it becomes cheaper, the ruble is strengthening.

Expert opinion

Despite GDP and inflation, the high cost of oil, according to the head of the Ministry of Energy of the Russian Federation Alexander Novak, is unprofitable for international trade.

Novak pointed to the departure of consumer companies from oil to other sources to reduce costs in case of increased cost. Oil companies themselves are in favor of stability of quotations.

The high cost of oil can slow down economic growth and reduce oil consumption. "Therefore, you should always think about a certain price that suits both consumers and exporters," Novak says.

Oil Price Forecast 2020

The price of oil affects GDP growth, inflation, and the economy as a whole. The Chairman of the Central Bank of the Russian Federation E. Nabiullina announced three forecasts of monetary policy depending on the cost of a barrel of oil in 2020.

  1. The cost of $ 75 / barrel means a stable economy of the Russian Federation.
  2. At $ 55 / barrel, inflation could accelerate to 5-5.5% due to 2019 reforms, but will return to the 4% target at the end of the year.
  3. $ 35 / barrel will lead to a difficult economic situation in the Russian Federation.

Latest news from analysts

Experts predict the maximum increase in oil production in the next decade, but there is also an opinion that the peak of production is ongoing or has already passed.

Analysts at the National Rating Agency believe that increasing MET at quotes of $ 60-65 will lead the Russian Federation out of the crisis and raise the economic level by 2020.

Watch the video: Oil can hit $90 per barrel by the end of Q2 2019, analyst says. Capital Connection (February 2020).

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