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US Federal Reserve's Tougher Policy Could Further Decrease Oil Prices

© AFP 2021 / FABIO BUCCIARELLISmoke is seen rising from the the burning leftovers of an oil refinery over oil fields near the oil rich city of Ramlan, on October 20, 2013 near the Syrian Kurdish town of Derik
Smoke is seen rising from the the burning leftovers of an oil refinery over oil fields near the oil rich city of Ramlan, on October 20, 2013 near the Syrian Kurdish town of Derik - Sputnik International
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If the US Federal Service implements a tougher policy, it may contribute to a further decline in oil prices, Russia's Sberbank CEO German Gref said on Friday.

MOSCOW (Sputnik) — Earlier this week, OPEC reduced its long-term forecast for oil demand, not expecting a return to prices of $100 per barrel until at least 2040.

Shortly afterward, the US federal Reserve announced that it might toughen the stress tests of US banks and foreign financial branches operating in the country over the risks associated with rapid decline in oil prices.

"Oil prices are very much linked to the policy of the US Fed, so the key trends are indeed connected with further price decline. The dollar is likely to strengthen, which will lead to a toughening of the Fed policy — meaning the dollar will leave the largest derivative oil market. From the point of view of the monetary situation, the oil price should fall," Gref, Russia's former finance minister, said.

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The US economy is one of the most oil-dependent economies in the world, and increase in crude oil prices inevitably affects the rate of the national currency — the oil price increases, resulting in increased offer of the US dollar in the market, and the exchange rate goes down.

According to Gref, the price of a barrel of oil in 2016 will hover around the current level of $35-36 dollars "plus or minus 10%."

He also noted that the Russian economy was saved by "the historic step by the Central Bank," to let the ruble float freely. According to Gref, the ruble exchange rate does not matter much when it comes to saving the economy.

The oversupply of oil reserves and stable demand over the past two years has driven global prices to lows not seen since the 2007-2008 financial crisis. The Brent benchmark was trading at $37.9 per barrel, as of early Friday. Earlier this week, the price of US crude oil fell below $ 36 per barrel.

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