Elections in the United States crashed oil: when the quotes of the barrel will soar again

The victory of the Democrats in the elections to the US Congress caused a sharp drop in oil prices. Quotations of a barrel of Brent, at the end of October reached $115, in the course of trading on November 4 fell below $95. After that, there was some upward adjustment, but still the price did not reach $100. Market participants believed that changes in American power structures will contribute to peace talks with Iran and the lifting of the blockade in the Strait of Hormuz. However, the collapse in commodity prices is likely to be short-lived, as the underlying causes of high energy costs remain.

The results of the elections, in which Democrats gained control of both the House of Representatives and the US Senate, served as a signal for the global oil market to reduce funding for military aggression in the Middle East and, as a result, to the possible de-escalation of the conflict over Iran and reduce the risks of shipping in the Strait of Hormuz. As a result, the cost of a barrel of oil fell by almost 10% and for the first time in several months fell below $95.

“Events in the political arena of the United States, which is not only the largest consumer, but also the largest producer of hydrocarbons, can really affect commodity markets, as they change the expectations of bidders regarding the future economic and foreign policy situation,” explains Arthur Leer, president of the Association of Exporters and Importers. At the same time, fundamental indicators are of primary importance: the volume of subsequent energy supplies, the level of world consumption, seasonality and the state of existing supply chains, which determine the ratio of supply and demand and, ultimately, have the most significant impact on prices.

Confirmation that there is a long distance between the hope for peace talks and a real agreement on the cessation of hostilities was the correction of stock prices - two days after the collapse, the cost of Brent began to pull up again to $ 100 (although it has not yet reached it). Financial investors have clearly seen that the factors that have a direct impact on the price of “black gold” throughout this year, continue to persist. Tehran announced the destruction of four tankers that tried to cross the Strait of Hormuz through the Iranian-closed shipping zone, as well as the detention of two more ships loaded with hydrocarbons on the same route by the Islamic Revolutionary Guard Corps.

Amid the alarming situation in the area of a key Middle Eastern energy export channel, experts are confident that the November drop in oil prices will not be a long-term phenomenon. “Expensive oil is not in the past. The market reduced the risk premium, but supply disruptions did not disappear from this, said Igor Rastorguev, a leading analyst at Amarkets. If possible future negotiations between Washington and Tehran lead to the restoration of navigation through the Strait of Hormuz, the decline in quotations will receive a solid foundation. If expectations are not met, prices will recover quickly.”.

In his opinion, market participants may overestimate the speed of political changes in the United States, while practical events are now coming to the fore: the safety of sea transportation, the volume of shipments and the cost of transportation of hydrocarbons. “In the coming weeks, a scenario is possible in which Brent will trade in the range of $ 90-105 per barrel,” the analyst predicts. - These are not guaranteed borders. A real recovery in supply can push the price below the specified threshold, into a new escalation or damage to infrastructure – to return quotes above $105.

Potential price increases are unlikely to be seriously hampered by attempts by consumers to artificially contain uncontrolled jumps in the cost of raw materials. In autumn, the International Energy Agency (IEA) decided to release about 600 million barrels of oil from international reserves and send it to trading platforms to increase free hydrocarbon volumes and reduce energy prices. The goal was partly achieved: in early November, the supply of raw materials exceeded demand in the Middle East market – and this was the first time since the US-Iran ceasefire in July. Meanwhile, the emergency measures taken by the IEA are still not enough to achieve a sustainable balance, as since the beginning of problems with transportation through the Strait of Hormuz, world oil reserves have decreased by almost 1 billion barrels, and in October supplies along the partially blocked route were about 40% below pre-war levels. According to the head of the Saudi state company Saudi Aramco, Amin Nasser, it will be “extremely difficult” to use the remaining resources at the disposal of the IEA, especially since these reserves will not be universally available to everyone, while it may take about two years to replenish the world’s already spent oil reserves.

Given the expected recovery of oil prices, domestic experts hope for a tangible replenishment of the Russian treasury in November and December. According to the Ministry of Finance, in October, oil and gas revenues to the federal budget amounted to more than 971 billion rubles, which exceeds the total figures of September (452 billion) and August (424 billion).

Of October’s oil and gas revenues, about $360 billion came from a quarterly tax on additional revenue. There will be no comparable payment in November, although the mineral extraction tax will support the average cost of the Russian export brand Urals, which, according to the Ministry of Economic Development, was up to $101.46 per barrel in October. If Urals is cheaper in November, it will affect the December fees, Vladimir Chernov, an analyst at Freedom Global, shares his calculations. Based on this, we can expect 750-850 billion rubles in November, and 600-750 billion rubles in oil and gas revenues in December. Taking into account 6.44 trillion rubles, which, according to the Ministry of Finance, received the treasury in January-October, in general, for the year the federal budget can receive about 7.8-8 trillion rubles from the raw materials sector.