Russia’s recent economic growth has been almost entirely due to its ability to deliver record oil and gas production at record prices. With prices in free fall, Russia’s economy will be stressed much more more than much of the world. With much of its revenues coming from oil, the government’s ability to intervene will be limited, and it’s ambitious spending plans will be scaled back. Hopefully, greater economic diversification will come as a result, but sadly it won’t come without some pain for the average Russian.

“In the short-run, market participants will focus on both OPEC and perhaps even non-OPEC producer responses to balance the market.”

“A temporary drop below $25 is possible if the global recession extends to China and significant non-OPEC production cuts are required,” it said.

“In our view, oil prices could find a trough at the end of Q1 2009 or early Q2 2009 with the seasonal slowdown in demand. Then, as economic activity starts to strengthen, we see oil prices posting a modest recovery in the second half of 2009.”

Share This