Kremlin revises oil price forecast amid war‑driven fund strain
The Kremlin is contemplating altering the budgetary rule by adopting a revised forecast for oil prices—from $60 to $50 per barrel, according to Bloomberg. This consideration arises from declining commodity prices and the growing financial burden of the war in Ukraine.
While formulating this year's budget, Russia anticipated the price of oil to be $60 per barrel. However, Bloomberg sources suggest that the Kremlin is considering revising this forecast to $50 per barrel. Discussions on this issue are in the early stages, and potential decisions may necessitate a reduction in expenditure.
Whenever commodity prices surpass the budgeted amount, the surplus is directed to the National Wealth Fund. Bloomberg elucidates that this fund functions as a safety net: when prices decline, the government utilises its resources to offset the revenue shortfall.
Revenue from fuel exports accounts for 30 percent of Russia's budget.
Fund depleted due to war
The agency highlights that the National Wealth Fund has been significantly depleted owing to the Kremlin's military spending in Ukraine. At the start of 2022, it held 8.4 trillion rubles, but now it amounts to 3.3 trillion (equivalent to approximately £35 billion).
In a meeting on Saturday, OPEC+ countries resolved to increase oil supplies by 411,000 barrels per day in June, marking the second consecutive month of growth. Saudi Arabia, the leader of the cartel, cautioned group members exceeding set production limits that further increases in supply are possible.
OPEC+, comprising the Organization of the Petroleum Exporting Countries and allies such as Russia, continues to uphold production restrictions at nearly 5 million barrels per day. A considerable portion of these cuts is anticipated to remain until the end of 2026. The group's next full ministerial meeting is scheduled for 28 May at 3:00 PM Greenwich Time.
Ajay Parmar, director of oil markets analytics at ICIS, observed that the additional oil being supplied by OPEC+ is unlikely to be fully taken up by the market.
The expert also noted that fuel demand is rising only slightly, particularly in the wake of new tariffs recently implemented by the United States against its trade partners.
