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Average oil price to be over $30 per barrel in 2016 — Russian minister

January 25, 9:47 UTC+3
According to Russian Economic Development Minister Alexey Ulyukayev, global oil prices have recovery potential
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Russian Economic Development Minister Alexey Ulyukayev

Russian Economic Development Minister Alexey Ulyukayev

© Stanislav Krasilnikov/TASS Archive

MOSCOW, January 25. /TASS/. Global oil prices have recovery potential, Russia’s Economic Development Minister Alexey Ulyukayev said on Monday.

"As for oil prices I agree that they have recovery potential. It’s a given that in 2015 the demand increased by around 1.5 mln barrels. The global economy grew by 3%, which means the demand will rise for sure," the minister said.

According to Ulyukayev, the average annual oil price will be higher than $30 per barrel in 2016.

"I think there will be some kind of rebalancing. Average annual oil price will differ from today’s, it will be higher," the minister said.

Russia’s Economic Development Minister does not expect the Central Bank to change the key interest rate at its board meeting on January 29.

"I don’t expect them to change anything," the minister said on Monday when answering the respective question.

Earlier he said there is potential for reduction of the key rate though the regulator is to take the final decision.

In mid-2015, Russia’s Central Bank took a break after lowering the key rate (the rate of weekly repo) several times in a row. Currently, the key rate is 1%. At the same time the regulator gave a signal to the market that it would further cut the key rate at one of its next 3 meetings. The next meeting of its board of directors will be held on January 29.

All the rates in the economy, including rates on loans given to small and medium-sized businesses, depend on the key rate set by the Central Bank.

In Alexey Ulyukayev's words, Russia’s downward GDP trend did not persist in December 2015, according to preliminary estimates.

"I don’t think the trend [of GDP contraction] will hold, according to my expectations. I don’t expect December [results] to worsen compared with November," the minister said.

Earlier he said Russia’s GDP contraction equaled 3.9% in 2015. According to the latest forecast by the Economic Development Ministry, contraction stood at around 3.7-3.8% throughout the year.

Also, the minister said that lack of investment and production capacities hindered economic growth amid the ruble’s devaluation. "The problem is that cost improvement triggers growth provided that there is a great deal of production capacities in place or one may quickly invest in them. Currently, we don’t have a great deal of production capacities unlike previous years while on the other hand we don’t invest enough, unfortunately," he said.

Currently, the ministry reviews its estimates for 2016.

 

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