No reason for panic due to oil prices

Analysts of the investment bank Goldman Sachs forecast a new fall in oil prices in the near future. 

They explain this by a combination of proximity stocks of petroleum products, which accumulated in the US and Europe, as well as approaching of processing volumes to their historical maximum and reduction of space in storage tanks. According to experts, the situation is worsening by low growth in demand for petroleum products (especially gasoline) and increase of their supply from the East. 

‘‘The current situation recalls events in 1998 and 2009, when the storage was full and petroleum crude oil prices fell sharply," RBC cites them.

According to the investment bank, the supply will be greater than the demand for a long period of time, and this imbalance won’t change during the next years.

The analyst of Sberbank, CIB Valery Nesterov, noted in an interview with a correspondent of Vestnik Kavkaza that it is difficult to say now whether the prognosis of the Goldman Sachs’ experts is comng true. "Such alarmist, extreme assessments have a massive tendency. I don’t think that shares will increase in price significantly in a Swiss bank, or Deutsche Bank, although they forecast it. Even our official forecasts are roughly the same. So I would just take it into consideration," he said.

The assistant professor of the department on regulation of the economy, Deputy Head of Department of state regulation of the economy on educational work at the Institute of Public Administration and Management (IGSU) RANHiGS, Ivan Kapitonov, inclines to forecast a fall of oil prices in a more careful way.

"The problem is in this forecast. It is unclear if the analysts had taken into account the change in the demand for oil products. Now we have unfavorable time for the demand for petroleum products, as it is decreasing now. And it is logical that oil-producing companies process oil for their warehouses. Later, in the spring and summer, they will sell it. So now the situation won’t last for a long period of time. There are no unexpected things. The point is that the analysts could not take into account the dynamics of the demand for petroleum products,’’ the expert said.

As the head of the Baku Oil Research Center Ilham Shaban noted, a collapse in oil prices is possible, and it is associated with the filling of storage tanks.

‘‘It is a wrong fact that there is little space in storages. It is not economical to keep oil in storages. The point is that oil producers keep oil in storages on land, or on barges in the sea. Storing a barrel on land costs $1, and on barges it is about $1.5. But they store it in order to receive more margin. However, when the cost of storage, the current price and the ability to receive profit don’t satisfy producers, they are forced to offer this volume. This created a fall of oil prices. Certainly, traders and market participants know the period of time and approximate volumes of oil stored in these repositories. Their forecasts are based on this information. So they predict when another decline in oil prices should be expected,’’ the expert said.