Balancing of oil prices is a result of an agreement by oil producing countries, economist says

YEREVAN, FEBRUARY 19, ARMENPRESS: The recent small rise in Brent oil prices is determined by the agreement of the oil producing countries. Economist Gor Tsarukyan commented the recent trends in international oil markets for “Armenpress”.

What are the main determinants of the slight rise in prices in the oil markets?

There are some interesting changes in the policies of oil producing countries. The most important point was the meeting of the representatives of Russia, Saudi Arabia and Venezuela on the latter’s initiative. All the oil producing countries, except Iran, have decided to set a certain level and not produce more than that. By the way, it didn’t happen by chance. The sanctions on Iran were lifted on February 16; thus, oil producing countries set a level on a day when Iran has not yet entered and doesn’t have a segment in international oil market. Iran’s first reaction was negative. After the statement the oil prices fell up to $32.5. Still after the negotiations in Tehran, it turned out that Iran supported that agreement. It’s hard to say what the concessions were; the details were not revealed. Hence, this agreement was the background of slight rise in oil prices up to $35.

If the level set by the oil producing states is kept, what are your predictions on oil prices?

It’s highly unlikely that the oil prices will significantly go up. If the level set by the oil producing states is kept, the oil prices will be around $30-40. It’s hard to predict any increases. Nevertheless, one can never say who may break the deal.

As Armenia has certain dependence on Russian economy, it would be interesting to know how this increase may affect Russian economy. Can we expect some positive impulses?

If the price is around $30-40, it’s not an increase. Of course, it’s an increase if we compare it with $29, but in overall terms it’s a balance. Taking into account the fact that Russia has estimated its budget with oil prices $50 a barrel, it’s clear that even if the prices reach $40, Russia will still be having problems. It would be very hard to avoid slowing of the economy. By the way, international rating agencies make negative predictions on Russia saying that the economy will fall by 2.5-3%. Even Russian Minister of economic development predicted a fall of 1%. Thus, in this period of time there won’t be a collapse, but one cannot predict positive outcomes.

Russia, Saudi Arabia, Qatar and Venezuela as a result of the negotiations in Doha on February 17 stated that they are willing to keep the oil production on mid-levels for 2016.

Anna Gziryan