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Iron Ore Prices Rise as China Ramps Up Imports

Iron Ore Prices Rise as China Ramps Up Imports

Despite challenges like the Evergrande…

Russia Forecasts $40 Oil

The Russian economy ministry has predicted $40 per barrel oil in 2017 and beyond, in stark contrast to forecasts made by major international institutions regarding the future of oil markets.

"The basic precondition from the standpoint of oil price is that oil prices will drop to $40 per barrel in this year and remain at the level of $40 [per barrel] after that," Maxim Oreshkin, the Russian Minister of Economic Development, said.

"The average annual oil price under the base case and the target scenarios is $45.6 per barrel in 2017, $40.8 per barrel in 2018, $41.6 [a barrel] in 2019, and $42.4 [per barrel] in 2020.”

The Russian government also expects the ruble to weaken against the dollar, stabilizing at a 63-64 ruble to dollar rate in the next few months. By the end of 2017, Moscow’s base economic scenario foresees the dollar equaling 68 rubles and by the end of 2018, 70.8 rubles.

"We fundamentally believe that the current moment is highly beneficial for foreign exchange purchases by importers and population preparing for overseas trips," Oreshkin added. "The base case presumes inflation decline to the target of the Bank of Russia (4 percent) already in May; we expect inflation at the level of 3.8 percent under the base case scenario by year-end," the minister said.

Related: The Insignificant Truth: Why Gasoline And Distillate Draws Don’t Matter

This isn’t the first time in the past few weeks Russia has predicted $40 per barrel. A Bloomberg report from last month showed that Moscow had planned its national budget for the next several years based on the low figure.

“Once (actually more than once) bitten, twice shy,” Elina Ribakova, an economist at Deutsche Bank AG in London, said in March. “The central bank and the Finance Ministry are sticking to the conservative $40 oil scenario because they want to be ready for and protect themselves against the worst-case scenario.”

By Zainab Calcuttawala for Oilprice.com

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  • Rusky on April 06 2017 said:
    It's so it can base its public spending on $40 and the oligarchs and putin keep the rest over $40
    Cut basic services to your people pocket the rest. Russian society at its finest
    They control the media they control the message.
  • Kr55 on April 06 2017 said:
    Plan for the worst, hope for the best. Sandbagging is a common practice when you want to make it look like you're over delivering.

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