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Kazakhstan not to feel drop in oil prices -- not in short-term

The fall of the price of oil on the world markets will not have a great effect on Kazakhstan’s economy at least not in the short-term, according to a number of Kazakh official and oil experts. The price per barrel of oil went from $106 to around $80 since June 2014.

“The country’s monetary policy will not be affected even if the average oil per year is at 60-70-80 dollars per barrels,” said Kairat Kelimbetov, head of Kazakh National Bank.

Kazakhstan is among the top oil and gas producers in the world and Kazakhstan depends much on its oil and gas revenues. The large part of these revenues are saved in the State Petroleum Fund for future generations. It accumulated $93.9 billion as of 2014. This Fund allows to stabilize the national economy and its resources in theory could be used for implementation of strategic projects in case of low revenues from oil export. Earlier Kazakh President Nursultan Nazarbayev gave permission to use money from the National Fund for development of the national economy. This decision is not connected with oil prices because it was it taken long before when they were at high level. Thus any strategic projects will have enough money and will be implemented.

But low oil prices in the long-term perspective will certainly affect Kazakhstan’s economy as well as the economies of other oil producing countries. Kazakhstan’s National Fund is rich but its recourses are not unlimited. Indeed, the wellbeing of Kazakhstan several years down the road will depend on oil prices. The country still has time to reduce its dependence on oil revenues through development of non-oil sector, something Astana is seriously implementing. Otherwise there is hope that oil prices will start to rise again.

Currently oil prices in world markets continue to fall. One barrel of ‘Brent’ oil currently costs just more than $86, while the price of the WTI oil is $80.5 per barrel. The Organization of the Petroleum Exporting Countries (OPEC) is scheduled to meet Nov. 27 in what could become a power struggle between members that are comfortable with lower prices and others that seek a cut in production to shore up prices.

Many analysts say that oil prices might recover by then. Moreover oil prices can rise if the Islamic State forces reinvigorate their offensive in Iraq or if competing militias interrupt renewed exports of Libyan oil, which have unexpectedly added more than 600,000 barrels of oil to the world market in recent months.

Published on:
November 4, 2014
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