Oil Staying at $40 Would Stall Russian Recovery, Ulyukayev Says

  • Russian economy minister says $50 a barrel 2016 average likely
  • Ulyukayev forecasts decreased oil price volatility next year

Any Russian economic rebound would stall if oil prices stay at $40 a barrel, even if such an outcome wouldn’t create “risks” for the banking industry or the budget, Economy Minister Alexei Ulyukayev said.

A pessimistic case for next year’s outlook assumes an average oil price of $40 a barrel, though it’s more likely that crude will average $50 a barrel, Ulyukayev said in an interview with state television on Monday. In that scenario, volatility eases in the second half of the year and prices resume a positive dynamic, he said.

Oil fell to the lowest level in more than six years in London amid speculation that a record global glut will be prolonged after OPEC effectively abandoned its longtime strategy of limiting output to control prices.

If oil prices remain at $40 a barrel on average next year, “we won’t move to a positive trend for the main economic indicators, industrial output, GDP, investment and consumer demand,” Ulyukayev said.

The economy contracted 4.1 percent in the third quarter from a year earlier, the decline slowing from a 4.6 percent pace in April-June. Gross domestic product will fall 3.7 percent this year, Ulyukayev said. Earlier, he warned that there’s no assurance of any economic growth for another five to 10 years, according to an interview with the Vedomosti newspaper published Monday.

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