The head of Russia’s central bank, Elvira Nabiullina, said on Monday that the likelihood of some other drastic collapse in oil costs was low and that the recovery would not be particularly higher than current rates.
“We are in several scenarios of economic progression, our base scenario is $40 a barrel for the next three years,” he said in remarks reported by the Russian news agency Tass.
He also said that the recovery of the Russian economy could be prolonged over time, unlike the 2008-2009 crisis, and that the central bank expects a slight GDP expansion next year.
“The recovery may be dragging on for a long time, as the drivers [of economic growth] are expected to be different than they were before the collapse in oil prices. We perceive it well and communicate about changing the economy’s style of behavior and its style of progression. Economic recovery Signs have now appeared and the Bank of Russia expects modest GDP growth,” Nabiullina said.
Nabiullina’s forecasts are bad news for Russia, which faces a double problem: Western sanctions imposed on its energy sector following Russia’s annexation of Crimea in 2014, and low global oil prices, which have fallen from $115 per barrel in mid-summer 2014 to mid-summer.
In response, Russia, the world’s largest oil producer, has increased its oil production to post-Soviet highs of 11 million barrels per day. The country’s traditionally superior oil production is on par with that of Saudi Arabia, the world’s largest oil exporter and second-largest country. The largest oil maker, which also increased its oil production to record levels in July.
Record oil production and traditionally high levels of oil reserves are largely to blame for the disruption of global oil markets for more than two years, arguably the worst oil market downturn in a generation.
However, oil costs rose on Tuesday, amid renewed hopes that the TPRB could cut oil production at its assembly in Vienna later this month, as well as reports that U. S. shale oil production has declined.
Bouncing from their lowest point in just two months in the last trading session, U. S. crude futures for December delivery had risen 90 cents, or 2. 1%, to $44. 22 a barrel by 0746 GMT. Brent crude futures rose 71 cents, or 1. 6%, to $45. 14 a barrel.