By Alexander Panin
While most oil-dependent economies are likely to suffer under the low and volatile oil prices predicted for next year, analysts paint a particularly dark picture for Russia, which is under the additional pressure of a faltering economy and Western sanctions over Ukraine.
At the end of last week oil traded at below $59 per barrel, hitting a new five year minimum. Oil prices continue to plummet from their peak in mid-2014 as supply exceeds demand, further buckling under OPEC’s decision in November not to curb production.
“Moving into 2015, we see downside risks to energy prices on the back of OPEC’s decision to allow the market to “stabilize itself.” This could result in lower oil prices but also higher price volatility,” Bank of America Merrill Lynch said in its commodities outlook released last week.
The bank reduced its 2015 Brent crude oil forecast to an average of $77 per barrel and WTI forecast to $72 per barrel.
Against the backdrop of falling prices, global oil supply and demand will likely stay in balance next year, according to the International Energy Agency’s Oil Market Report for December released on Friday.
Only in Russia will the plunge in oil prices, along with Western sanctions and a collapsing economy, result in a decline in both production output and demand, the report said.
The International Energy Agency revised Russia’s oil demand for next year down 5.5 percent, to 3.4 million barrels a day and production output down 70 thousand barrels per day, prompted by “price declines, sanctions and a falling ruble,” the agency said in a statement.
U.S. and EU sanctions over Moscow’s role in the Ukraine crisis have dried up foreign financing and helped spur inflation past 9 percent for 2014. The ruble has fallen over 40 percent to the U.S. dollar since January, buffeted by the falling oil price and geopolitical pressure.
Part of Russia’s oil production slump could be attributed to Russia’s biggest oil producer, state-owned Rosneft. Last month, Rosneft reported production output was decreased by 25 thousand barrels a day.Read more