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Russian central bank says finance ministry's oil assumptions too optimistic

·2-min read
National flag flies over the Russian Central Bank headquarters in Moscow

MOSCOW (Reuters) - Russia's central bank said on Friday that the oil prices and output levels the finance ministry had proposed as parameters in a new budget rule aimed at using energy revenues to boost state reserves were too optimistic.

Russia, which is looking to build up reserves after sweeping western sanctions limited its access to global markets, plans to reinstate a budget rule that diverts oil revenues into its National Wealth Fund (NWF) once prices rise above a certain level.

The finance ministry had proposed using a crude oil price of $60 per barrel and daily output level of 9.5 million barrels as parameters.

"The base price of oil and oil production seem to be too high to us in the new modification of the budget rules," central bank analysts said in a note.

The previous budget rule, which was suspended amid harsh sanctions imposed after Moscow started what it calls a "special military operation" in Ukraine on Feb. 24, specified that oil revenues would be diverted at a price of $40 per barrel, with an annual 2% increase.

Currently, Russian flagship oil Urals blend is traded above $80 per barrel, some $20 below the global Brent benchmark.

But in the medium and long term, a Urals oil price at $60 seems significantly above the equilibrium level, factoring in elements such as the price needed to make shale oil production profitable, and that envisaged by major oil-producing countries in their budgets, central bank analysts said.

The high oil price target could pose risks for building up the NWF, the central banks said. The 9.5 million bpd production target poses a similar, albeit smaller, risk, the analysts added.

According to the Rosstat statistics office, Russia's July oil and gas condensate output was 10.76 million barrels per day (bpd), up from 10.70 million bpd in June. Without condensate, it stood at almost 10 million bpd last month.

The final version of the budget rule is yet to be approved by Russian President Vladimir Putin.

(Reporting by Vladimir Soldatkin and Darya Korsunskaya; Editing by Andrey Ostroukh and Jan Harvey)