Russia’s central bank said that new oil price and production goals proposed by the nation’s finance ministry are too optimistic. In a new budget, the ministry sets the price of Russia’s Urals crude at $60 a barrel and an output of 9.5 million barrels per day. “The base price of oil and oil production seem to be too high to us,” the central bank said in a note last week. Loading Something is loading.
Russia’s central bank said that new oil production goals proposed by the finance ministry are too optimistic, adding that the nation would likely fall short of its planned price and production target in its new budget draft.
The new budget, which was originally proposed in July, sets the price of Russia’s Urals crude at $60 a barrel and an output of 9.5 million barrels per day.
That’s a $20 downgrade from the price that Urals currently trades at, which hovers around $80 a barrel. It maintains a similar production to last month though, as Russia produced nearly 10 million bpd of oil a day in July.
But central bankers think Russia is unlikely to meet the new price target or maintain that level of output, warning those goals could be “too optimistic” given the fundamentals of Russia’s energy market at the moment, Reuters first reported.
“The base price of oil and oil production seem to be too high to us in the new modification of the budget rules,” the central bank said in a note on Friday, according to Reuters.
The final version of the budget has not yet been approved by President Putin, who has final say.
That pessimism aligns with other recent forecasts. A report from Rystad Energy estimates Russia’s oil production to fall by over a million barrels a day as summer demand fades into the autumn season, and Asian importers — who have been holding up the demand for Russian crude amid Western sanctions — are also not expected to maintain their appetite for Russian crude throughout the year. India and China have begun lowering their consumption of Russian oil, largely because of more favorable prices from other suppliers.
That will lower Russian oil prices as a consequence — a surprising reversal from what was seen earlier this year, when roaring demand for Russian crude amid western sanctions allowed the country to rev up its war against Ukraine. Russia made $24 billion within the first three months of its invasion from selling energy products to China and India alone, previous data showed.
But that could change, as the poor outlook ahead for oil could mean an economic blow, or even a economic depression, is in order for Moscow’s economy.
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