Putin on coronaviruses in Russia: the Situation is under control

Before heading in Pskov, the head of state held a meeting in the airport terminal Vnukovo-2 on the most pressing global problems. It is a coronavirus, the situation in the global economy and oil market. The meeting invited the government and Kremlin officials, heads of leading Russian oil companies. Among the participants – the first Deputy Prime Minister Andrei Belousov, Deputy Prime Minister Yuri Borisov, the Minister of Finance Anton Siluanov, energy Minister Alexander Novak, assistant to the President Maxim Oreshkin, the Chairman of the Central Bank Elvira Nabiullina, CEO of “Rosneft” Igor Sechin, the head of “Gazprom oil” Alexander Dyukov, the first Executive Vice-President of LUKOIL Ravil Maganov and the head of RDIF Kirill Dmitriev.

Photo: EPA-EFE/ANDREA MEROLA Fake news about the coronavirus flooded the social network

“Global financial and commodity markets are very sensitive to events on a planetary scale,” – said the President. Such as coronavirus. “Russia is doing everything necessary to combat this dangerous disease, take the appropriate measures. I hope that they will be effective. The overall situation is under control,” he said.

Need to see how to react in relation to the economic impact of the outbreak of coronavirus, said the President. Therefore, the President decided to consult with the heads of oil companies to listen to opinions about what steps to determined by balancing the global market. “The negative effects already being felt, affect the entire world economic system, almost all States, given the current high interdependence and interrelatedness of economies,” he explained.

In China, first confronted with the spread of the disease, indices businessth activity, published on Friday, fell below the minimum values of the global crisis of 2008. And world stock indexes fell more than ten percent. “In this regard, last week was the worst for the global markets since the 2008 crisis”, – said the President.

Russia will fulfill its social obligations even when the deterioration of the situation in the global economy

it is Natural that on the background of the problems leading economies, the General decline in the demand of oil quotations of mark Brent by the end of the week down to around $ 50 per barrel. While in the early years they were around 70 dollars per barrel.

“of Course, it is difficult to predict how long will be the trend, but in any case, it is important to be prepared for different scenarios,” he set the task of Putin. For the Russian budget, for our economy the current level of oil prices – are reasonable, he said.

Photo: Pavel Lisitsyn / RIA Novosti France is not going to close the borders because of the coronavirus

“In the framework of our macroeconomic policies this year we took the baseline value of Brent crude at 42.4 per barrel”, – Putin said. And accumulated reserves, including the national wealth Fund, enough to provide stability, fulfillment of all fiscal and social obligations even with a possible deterioration in the global economy, he said.

the President called the numbers: 563 billion dollars – the international reserves of Bank of Russia, 124 billion (of 7.87 trillion rubles) – the national welfare Fund. However, this does not negate the need for action, including in cooperation with foreigninimi partners. This week will be the meeting of OPEC+ in Vienna. “This mechanism that we have created together with other leading oil-producing countries, has already established itself as an effective tool in ensuring long-term stability to global energy markets”, – said Putin. Due to this managed to get additional incomes in the budget, while domestic mining companies were able to confidently invest in promising development projects.

the cut-off Price at which the budget of Russia receives oil revenue in 2020 is 42.4 per barrel of Russian Urals, which is traditionally somewhat less than North sea Brent. While prices have not dipped below this level only affects the revenues of the national welfare Fund. If the Urals price falls below, you will suffer the revenues of the Federal budget.

Thanks to the strict budget rule and accumulated reserves, the Finance Ministry feels relaxed. “We are now in the price of oil around U.S. $ 30 per barrel (I fantasize) four years quietly going to Fund our expenses,” said Finance Minister Anton Siluanov (quoted by TASS), adding that in reality, the low price will not last long. In the spring the Ministry of Finance intends to clarify the budget parameters for three years.

of Course, it is difficult to predict how long will be the trend, but in any case, it is important to be prepared for different scenarios

the situation on the oil market now a lot will depend on meetings of Ministers of countries participating in the Pact to cut production OPEC oil+ 5-6 March in Vienna.

According to most experts, OPEC+ will be able to maintain the price of oil, if the decision on additional decrease in production. “The agreed additional production cuts are likely to reverse the trend in the prices of oil, and only the extension is unlikely to contribute to the growth of prices”, – says senior analyst of “Alfa Capital” Maxim Biryukov.

the Fall in oil prices, the Ministry of Finance yet does not bother. Photo: iStock

“the Next significant level of oil prices – about $ 35 per barrel, but it is unlikely that the market will fall so much” – the analyst of commodity markets of the company “Opening Broker” Oksana Lukicheva. In her view, the price stabiliziruemost near the level 47-50 dollars per barrel of Brent crude until a more accurate estimate.

Drop in oil consumption is estimated to be from 0.15 to 0.6 million barrels per day. In fact, jumps of quotations of “black gold” while not based on accurate data and on information on the spread of the virus, the panic and the oil market.

For the Russian budget, for our economy, the current level of oil prices – acceptable

“Low elasticity of demand for oil leads to serious price fluctuations in response to even moderate changes of consumption”, – explains the head of the research Department on fuel and energy complex and housing and communal services of the Analytical center under the government of the Russian Federation Alexander Kurdin. In his opinion, even excluding the effect of coronavirus poor state of the economy – particularly in Europe – has led to a noticeable excess of oil on the world market in the beginning of 2020, and it has a serious downward pressure on prices. Countries participating in the OPEC+, tried to compensate for this excess, but taken fall of 0.5 million barrels a day was not enough.

“Short-term panic could derail soon quotes more seriously than we see today, apart from the fundamental factors,” – said Kurdin. The expert believes that the clarification of the situation with coronavirus, when it will occur, coupled with standard growth in oil consumption in the second half should stabilize prices.