Bank of Russia Lowers Crude Price Forecast

Bank of Russia Lowers Crude Price ForecastBank of Russia Lowers Crude Price Forecast

The Bank of Russia has lowered its oil price forecast, preparing for an average price of $25 a barrel this year, the central bank's first deputy chairman said in a statement.

After years of oil prices above $100 per barrel, Russian authorities have in the past few months had to downgrade their forecasts. The Bank of Russia's latest outlook is the most pessimistic so far, Market Watch reported.

Speaking to reporters, Dmitry Tulin said the central bank had lowered its average price for oil in its risk, or worst-case scenario to $25 a barrel. The risk scenario sees oil prices staying close to this level in 2016 and recovering to an average of $35 a barrel next year.

The new base scenario, or the main and most-likely scenario, sees oil staying close to $35 per barrel this year, before recovering to an average of $45 next year. Thus, the bank's previous risk scenario for an average price has effectively become the base scenario.

"The difference is pretty substantial," Tulin added.

Bank of Russia Governor Elvira Nabiullina will make the new official base scenario public after a board meeting on March 18.

Under the latest pessimistic forecast, Bank of Russia may not be able to bring annual inflation to its target of 4% next year, as planned. To limit inflationary risks, stemming from low oil prices and a weak ruble, the central bank may have to raise rates, despite the continuing economic contraction, Nabiullina said earlier this week.

Speaking on the sidelines of an economic session in the lower house of parliament, Tulin also said selling foreign currencies from already depleted reserves will not help stabilize the sinking ruble for long.

Speculations have mounted over the past few weeks that Russia could sit at the negotiating table with members of the Organization of Petroleum Exporting Countries to discuss ways of boosting the decline in oil prices.

Venezuelan Oil Minister Eulogio Del Pino, who visited Russia, Iran, Qatar and Saudi Arabia this week, has urged the oil producing nations to "freeze" output at current levels.