Thursday, March 12 2020 14:19

ArmInfo. Reducing demand in the service sector due to falling oil prices will be less noticeable than in the construction sector and the real estate market in Russia,  where labor migrants from Armenia are involved. This opinion was  announced on March 12 through the Moscow- Yerevan-Bishkek-Tbilisi- Minsk video conversation by Alexey N. Zubets, Head of the Department of Sociology and Political Science, Financial  University under the Government of the Russian Federation (Moscow,  Russia).

He noted that recently, prices and demand for real estate in Russia  have been growing, and if not for the recent events related to  coronavirus and falling oil prices, the industrial market and housing  construction would have demonstrated high growth rates. Fears of  citizens, due to uncertainty, according to an economist, affect the  desire to purchase real estate, and generally refrain from major  purchases. In the short term, according to Zubets, while keeping old  property prices, some demand will still remain. If the situation is  not resolved quickly, crisis phenomena in the market cannot be  avoided.

<It is clear that the market is cyclical and after a certain time  will return to growth. But here the question arises - how long will  be prolonged the whole story with the virus and oil last. Recently it  became clear that the virus is much more resistant to treatment and  high temperature, which means it can drag on for the summer. We hope  that Russia and Saudi Arabia will agree and come to interim  agreements to reduce production. Because such a war is not  interesting for the Saudis or us>, he said.

At the same time, Zubets drew attention to the factor that before the  November election, tU.S. President Donald Trump needs low gas prices.  "It is possible that he will stimulate Saudi Arabia to put pressure  on Russia," the economist said, noting that with this scenario  developing, the restoration of the real estate and construction  market could drag on until 2021.

In particular, Zubets noted that in the long term, oil will stabilize  in the corridor from $ 35 to $ 55, which is quite comfortable for  Russia, but the dollar, according to the economist, will range from  65 to 70 rubles.  <In a few months, the situation should come to some  more or less stable state, and we will understand how this crisis is  destructive for the world economy and, in particular, the countries  of the post-Soviet space. I hope that there will be no disaster. We  are ready to overcome the consequences of this shock much better than  it was 5 years ago>, he concluded.  To note, as a result of the  disruption of the OPEC + agreement, the  cost of Brent oil futures  immediately after the opening of trading on  March 9 fell by 30% -  from $ 45 to $ 31.02 per barrel. This is the  biggest drop in Brent  prices in a day since the Gulf War in 1991. The  price of WTI oil  after opening fell by 27% to $ 30. Due to a sharp  drop, trading on  the exchange was suspended for several minutes.  Saudi Arabia has  notified some market participants of its intention  to significantly  increase oil production up to 12 million barrels per  day.  In April,  Saudi Arabia intends to increase oil production from  the current 9.7  million b /d to more than 10 million b / d, which in  the realities  of the oil market is "equivalent to declaring war", and  if  necessary, above a record 12 million b / d. In addition, Riyadh on  Saturday offered some of its crude oil at a much lower price - lower   by $ 6- $ 8 per barrel - to customers in all regions.  Officially,  discounts are planned to be announced today. 

Saudi oil  company Saudi Aramco offered Arab Light crude oil to  refineries in northwestern Europe at a discount of eight dollars per  barrel.  Traders believe that the goal of this step is to prevent  Russian  companies from selling their oil in Europe and returning  them to the  negotiation table for the OPEC + deal.