Riding the crude roller coaster

With crude price first plummeting and then rebounding after the U.S. Federal Reserve’s commitment to keep interest rates near zero for two year, Business RT spoke with Alexander Nazarov, oil and gas analyst at Gazprombank.

­RT:  OPEC and the International Energy Agency are cutting their estimates for oil demand growth. Do you agree with that?

AN:
"Not really, I don’t think oil demand will really drop.  What I think is that growth rates for demand will, this year and next year, than analysts of the International Energy Agency and OPEC thought just a couple of months ago."

RT:  So if demand is not falling why is demand falling over the last few sessions?  

AN:"Well the simple reality is that currently the oil price doesn’t have much in common with demand and supply.  The point is that crude oil is not a commodity, not a raw material, any more.  It is a financial asset the same as gold or equities or something like that.  So the main reason for the oil price increases or decreases these spikes, lies not in the supply and demand  area."

RT:  So I suppose that makes it quite difficult to predict how the price of oil will progress for the rest of 2011.  How do you see it developing?  Do you agree with the IEA assessment?

AN: "Absolutely.  It is absolutely hard to predict and basically I don’t think now oil and gas analysts should be asked for the price forecast – macro analysts could probably know better what will be seen in liquidity and currency exchange rates and so on.  I hope and I think that we wouldn’t see the Urals oil price lower than $100/bbl this year.  But it is just because it is good for Russia, maybe because I think so."

RT:  What will this all mean for the Russian economy with 50% of its budget income coming from energy at the moment?

AN:  "In the last two days you could probably clearly see what will happen to the Russian rouble as a result of a drop in the oil price.  Just 7% down in one day against Euro/Dollar basket, so basically the same will probably happen to all our economy – at least to the budget, as we say.  So basically I think it will be pretty hard next year if the oil price goes below $100/bbl, but probably it will get a kick to the development of other than commodities, other areas of the Russian economy."