The pre-war scale in Ukraine complicates the accounts of the Spanish Government. The threat of an armed conflict choking supplies of energy raw materials to Europe shoots up the price of oil day after day, which is already quoted up to 66% above the threshold that had been estimated for the drafting of the General State Budgets (PGE).
While Brent oil, the benchmark in Europe, this week it has come close to 100 dollars per barrel, the government had estimated a significantly lower average price of $60.4. This is stated in the Yellow Book of the PGE, in which the main lines of the State accounts are collected.
This gap already implies a much higher energy bill of what Moncloa expected for the current year, but the truth is that there is still more. And it is that the dollar appreciation in the international currency market as a result of the foreseeable proximity of rate hikes in the US, the threat to the numbers designed by the Spanish government is increasing.
Once again, the Yellow Book provides the key. If at the exchange rate estimated from the Treasury cabinet a disbursement of 50.3 euros was expected for each barrel of crude oil, the comeback of more than 7% that the dollar accumulates in the last year against the common currency triggers its current price to around 88 euros per barrel.
As if that were not enough, the price forecasts that analysts handle for the medium term also collide head-on with the estimates made by the Government. And it is that Moncloa took into consideration a 15.6% reduction in crude oil throughout the year while in the little that goes of this exercise an increase of 28% has already accumulated.
A good handful of analysis houses already consider that it is more than likely that Brent oil reach the end of the year around 100 dollars which is now round A level that, moreover, supposes price maximums for this raw material in the last eight years and, therefore, an important technical resistance whose overcoming could open the door to more agile rallies. Nothing to do with those negative prices seen in April 2020 in the midst of the collapse of the economy due to confinements.
In this sense, the estimates chosen by the Government pointed to a progressive relief of supply bottlenecks caused by the pandemic over the previous two years. Especially last year. However, the outbreak of the crisis in Ukraine has added an extra threat to supply bottlenecks that have remained unresolved.
So much so that the Organization of Petroleum Exporting Countries and its partners (OPEC+) have confirmed that the pumping of its wells does not reach its maximum joint offer threshold. And month after month. A circumstance in which precisely Russia is the protagonist, having repeatedly failed to cover its quota.
The situation is repeated in countries like Angola, Nigeria and Congowhich “have failed to maintain their growing production quotas” as explained by Francisco Blanch, global head of raw materials analysis at Bank of America.
As a result of this slow pace in petronations, the investment bank estimates in a recent analysis that Only in the worst case could prices be seen in line with the Government’s forecasts in his Yellow Book.
“We believe that Brent prices should average between 60 and 80 dollars per barrel until 2027,” says Bank of America in its latest estimates. Some numbers significantly above the range between 58 and 62 dollars registered in the last five yearswhich are the ones that seem to have guided the estimates with which the public accounts have been constructed for this year.
The two driving forces of the market have been conjured against him. In addition to the shortage of supply already mentioned, analysts confirm that the reactivation of the economy after the stoppage of the pandemic has translated into the largest increase in oil demand since the 1970s the last century. With the fall in reserves that summer trips imply, some investment firms are already seeing prices of up to 120 dollars for each barrel of ‘black gold’.
The confidence of the market in this upward path that threatens to make a break to the accounts of the Spanish Government is clear. So much so that, today, oil is emerging as the second asset with the highest appreciation potential in this year’s aggregate for the large international portfolio managers. Only the emerging stock markets win more sympathy among the strong hands of the market and the commodities It is a preferred bet with ease against bitcoin.
Obstacles and dependency
With these numbers and projections on the table, the “squaring the circle” of the Spanish economy to which this week the Secretary General of the Treasury, Carlos Cuerpo, was pointing to a new obstacle. And it is that until now he already had to deal with him rate rebound of the bulky sovereign debt supported by the public coffers.
Although it is a global problem, the situation becomes more complicated for Spain, since it is one of the European Union countries with the highest energy dependence, according to the Eurostat community agency. In this sense, almost three quarters of the energy consumed in Spain comes from abroad. And of this item around 98% corresponds to oil imports.
The latest data from the Corporation for Strategic Reserves of Petroleum Products (Cores) indicate that Spain imported a total of 6,171 kilotons of oil throughout 2021. A figure that represented 2.4% more than at the end of the previous year.
Despite the ecological transition is strongly encouraged From the public administrations, its construction is still going through fossil and non-renewable fuels. The same ones that promise a much larger bill than expected by Moncloa.