An expert assessed the risks of a decline in oil prices.

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Expert Assesses Risks of Falling Oil Prices
12.12.2024
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MOSCOW, December 12 - PRIME. The structure of Russia's oil and gas revenues allows for hedging against the risks of falling global oil prices, said Sergey Tereshkin, CEO of the oil product marketplace "Open Oil Market" (a Skolkovo resident), in an interview with RIA News.

In the expert's opinion, one of the risks for Russia's budget system next year will be a drop in oil prices. At its latest meeting, the OPEC+ alliance extended the current production quotas until March 2025, but the markets were not encouraged: Brent oil prices are currently in the range of $72-75 per barrel.

Tereshkin suggests that after Donald Trump's inauguration, the average annual prices could fall below $70 per barrel, as the new U.S. president plans to ease restrictions on drilling operations. Additionally, the increase in oil production in Guyana and Brazil will have an impact.

"However, the risks of reduced oil and gas revenues will be partly offset by the depreciation of the ruble, which will lead to an increase in the cost of oil in ruble terms. Another favorable factor for the budget will be the very structure of oil and gas revenues. According to the Ministry of Finance, in the first 11 months of 2024, 83% of oil and gas revenues (before subsidies to refineries) came from just two taxes: the mineral extraction tax (MET) on oil and the additional income tax (AIT), which accounted for 68% and 15%, respectively," said the source.

The first tax mainly depends on the volume of oil production, while the second depends on revenue from oil sales, minus extraction and transportation costs, the expert explained. According to current OPEC+ plans, Russia's oil production quota should increase by the end of next year from the current 8.98 million barrels per day to 9.21 million barrels per day. However, the actual level of oil production is currently below the quota level. Increased production will contribute to the growth of the tax base for the MET on oil.

At the same time, the decline in prices will not be dramatic, Tereshkin believes. He admits that Brent prices may temporarily fall below $50 per barrel, but this would lead to risks of reduced production in the U.S., and as a result, the market would quickly return to normal. Therefore, significant reductions in income from the AIT should not be expected.


Translated using ChatGPT

Sourse: 1prime.ru/20241212/ekspert-853509791.html
#Oil Industry Insights #Oil Prices #Energy Market #Crude Oil Price #Dynamics Market #Risks Economic #Forecast Oil Demand #Global Energy Trends #Oil Price Analysis
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