05-10-06

The prices for crude oil shed to the 10-month minimum with a barrel of available Brent costing just $ 55.13. For Russia, the price decline below $ 25/barrel could lead to the 40-% inflation, equal devaluation of rouble and losses of the bank sector of 2 % to 2.5 % of the GDP.
A barrel of Urals cost below $ 53, while the price for November futures for Brent and WTI was less than $ 58. The crude oil lost 27 % to 30 % vs. the records hit past July to August.

The reasons of the landslide are numerous. This year is rather quiet in terms of the hurricanes, which drove up crude oil to records past year. The next reason is some stabilization in the Middle East. Moreover, the prices are probably going down on apprehension of the increase in the US reserves of crude oil.
And last but not least, the decline in demand could be attributed to the end of the automobile season, as the heating season hasn’t begun yet.

The analysts don’t think the reduction will materially affect oil companies of Russia, which retain just 10 % of the excess profit generated via the export, transferring 90 % to the budget. But the prices of $ 25 to $ 35 per a barrel of Brent could be critical.
Still, the tendency is alarming, the analysts say. According to the outlook of the Strategic Development Centre elaborated for 2007 to 2009, the drop in prices to $ 25/barrel will lead to the 40-% surge in inflation and equal devaluation of rouble.

The rates of the GDP growth are forecasted to sink to negative values (-6 %). If the cabinet didn’t use Stabilization Fund and proceed with accelerating spending, the budget deficit would reach 7.5 % GDP, otherwise, it would be 1.5 % to 2 % of GDP.
The bank system (less Sberbank) would suffer losses of 2 % to 2.5 % GDP, requiring the aid of 0.5 % GDP.