The quotations of the Russian Urals oil dropped by 14.5 percent on December 5 to $34.6 per barrel for Rotterdam delivery. The quotations dropped even lower – to $34.9 per barrel at the Port of August. The last time when the Urals oil cost less than 35 dollars was reported in July 2004, the Vedomosti newspaper said.
Rosneft, one of Russia’s major oil companies, scheduled its budget on the base of $50 per barrel. The pessimistic scenario for Lukoil and Gazprom is based on $45.
The income of Russian oil enterprises began to decline in the third quarter. Rosneft’s net profit dropped by 18.6 percent to $3.5 billion. The end of the year will be the most difficult period for the national oil companies taking into consideration the largest reduction of prices and the growth of export duties. The export to foreign countries had dropped by almost 16 percent by November 2008.
Prime Minister Vladimir Putin said that the export of each ton of the Russian oil resulted in the loss of 68 dollars. The current price increased the losses to $140 from each exported ton.
The prices fall so fast that the government becomes unable to handle the situation. The Russian government decided to cut the export calculation term to one month, but the decision had not improved the situation. The January duty will be calculated on the base of $45 per barrel.
The export duty makes up about 20 percent of the budget income. The reduction of the export duty will cut budgetary income by about ten percent in January of 2009. Russia’s budget loses $2.2 billion a year when one barrel of oil becomes one dollar cheaper, experts calculated.
The average price of $30 per barrel will deprive the nation’s budget of 3.5 trillion rubles, which is comparable to the reserve fund – 3.7 trillion rubles as of December 1. Therefore, the reserve fund will be used to fund the budgetary spending.
The speed, at which prices set new psychological minimum, is impressive. Urals oil hit the level of $100 per barrel in September, $60 was reached in October, whereas in the middle of December it lowered to $35.
The price may fall to $30 depending on the news from China, Deutsche Bank analysts say. Merill Lynch specialists say that the price may hit the level of $25 per barrel in 2009, although the average annual price will be twice as high.
The OPEC plans to considerably cut the oil output under such circumstances. Chakib Khelil, the president of the oil cartel, said that the agreement had already been achieved. The surprise announcement is expected to be made on December 17. It goes about a more serious reduction of the oil output than two million barrels a day. Chakib Khelil urged the Russian administration to cut the nation’s oil output too.
The International Energy Agency reduced its forecast for oil demand in 2009 by 170,000 barrels a day, Bloomberg reports. OPEC will cut its output if the price remains below $60 per barrel.