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Russia forecasts economic slump as bailed-out bank gets more funds

MOSCOW (Reuters) – Slumping oil prices have put Russia’s economy on course for a sharp recession and double-digit inflation next year, government ministers said on Friday, as authorities scaled up a bailout for the first bank to succumb to this month’s ruble crisis. The economy is slowing sharply as Western sanctions over the Ukraine crisis deter foreign investment and spur capital flight, and as a slump in oil prices severely reduces Russia’s export revenues and pummels the ruble. The government has taken steps to support key banks and address the deepening currency crisis in the past week, including a sharp and unexpected interest rate hike, but analysts are pessimistic on the outlook for both the economy and the ruble. Finance Minister Anton Siluanov told journalists on Friday the economy could shrink by 4 percent in 2015, its first contraction since 2009, if oil prices averaged their current level of […]

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Ruble Set for Best Week in 16 Years as Russia Turns to Exporters

The ruble fell, trimming a weekly rally that drove the currency up the most since in 16 years as the government ordered Russian exporters to reduce their foreign-currency holdings to shore up confidence. The ruble weakened 0.2 percent to 52.6600 a dollar by 12:28 p.m. in Moscow, bringing its advance in the past five days to 11 percent, the first weekly increase since the period ended Nov. 23. Government bonds gained, pushing the five-year yield lower for the first time in four days. The Micex Index (INDEXCF) of equities rose for a third day led by OAO Magnit, the nation’s biggest retailer, and natural gas producer OAO Gazprom. Coordinated measures by Russia’s government and central bank have succeeded in driving a 52 percent rebound in the ruble since it slid to a record-low 80.10 on Dec. 16. Gazprom and four other state-controlled exporters were ordered this week to cut […]

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Ukraine Cuts Power, Train and Bus Services to Crimea

ENLARGE In this Oct. 26 file photo, a man walks past a mural on an apartment building depicting Russian President Vladimir Putin in a navy uniform with the Kremlin and a Russian flag in the background in Sevastopol, Crimea. Associated Press MOSCOW—Ukraine cut off electricity as well as train and bus service to Crimea on Friday, moves that could raise tensions with Russia, which annexed the peninsula in March and has been prodding Kiev to negotiate with Moscow-backed rebels in the country’s eastern provinces. The power cutoff is the second this week by Ukraine, which says it has electricity shortages of its own because rebels have halted shipments of coal to its power plants. The halt in train and bus service, however, could indicate Ukraine is stepping up its pressure of the peninsula. In both cases, Ukrainian officials cited safety concerns. Passenger and cargo train service, both foreign and […]

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Cost of Russia’s bank bailout surges as weaker rouble bites

US actor Bruce Willis has been the face of a Trust Bank advertising campaign Russia trebled the size of its bailout of troubled lender Trust Bank to Rbs99bn ($1.9bn) on Friday, laying bare the growing financial fallout from its currency crisis and the slump in the price of oil, its main export. The rapidly rising cost makes the rescue of Trust bank, which foundered as the rouble collapsed early last week, the second-largest seen in Russia. It has now consumed a tenth of the money earmarked by the government last week for bank bailouts. The authorities also said they would spend Rbs320bn ($5.9bn) propping up two other banks. Anton Siluanov, finance minister, said state-owned VTB , the second-largest lender by assets, could receive Rbs100bn before the end of this year and another Rbs150bn in 2015, while Gazprombank could be allocated Rbs70bn. More On this topic IN Europe Moscow said […]

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Oil and Gas Prices Are Manipulated Once Again

OPEC will not cut output even at $20 a barrel … OPEC will not cut oil production even if the price drops to $20 a barrel and it is unfair to expect the cartel to reduce output if non-members do not, Saudi Arabia said. “Whether it goes down to $20 a barrel, $40, $50, $60, it is irrelevant,” the kingdom’s Oil Minister Ali al-Naimi said in an interview with the Middle East Economic Survey (MEES), an industry weekly. In unusually detailed comments, Naimi defended a decision by the Organization of the Petroleum Exporting Countries, whose lead producer is Saudi Arabia, last month to maintain a production ceiling of 30 million barrels per day. – Daily Mail Dominant Social Theme: Nothing that is happening to oil is surprising. Free-Market Analysis: For years we had arguments with “peak oilers” who maintained that the world was running out of oil. Of course, they always […]

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Brent crude prices steady above $60 in thin Christmas trading

SINGAPORE (Reuters) – Brent crude oil futures traded steadily above $60 on Friday as a building supply glut and weak Japanese import data weighed on the market while strong U.S. economic data published over Christmas provided support. On the supply side, data suggested an increasing glut as a U.S. report showed crude inventories unexpectedly rose by 7.3 million barrels last week to their highest December level on record. Analysts had expected a seasonal draw. [EIA/S] The demand picture was mixed, with price supporting data from the United States where jobless claims fell and third-quarter economic growth indicated the quickest pace in over a decade. However, in Japan, crude imports in November dropped 17.3 percent from a year earlier to 14.68 million kilolitres (3.08 million barrels per day), data from the Ministry of Economy, Trade and Industry showed. Front-month Brent crude prices were trading at $60.68 at 0812 GMT, up […]

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Saudi Rulers to Curb Wages as Kingdom Confronts Oil Slump

Saudi authorities pledged to curb wages and push ahead with investments next year as the world’s largest oil exporter seeks to counter the effect of tumbling crude prices on the economy. The government said it expects the budget deficit in 2015 to widen to 145 billion riyals ($39 billion), from 54 billion riyals this year, the Finance Ministry said today. That amounts to about 5 percent of gross domestic product, according to Arqaam Capital, a Dubai-based investment bank. The Finance Ministry said the government will continue to invest in areas such as education and health care, while exerting “more efforts” to curb spending on wages and allowances, which make up about 50 percent of spending. Projected revenue will drop more than 30 percent next year to 715 billion riyals, while expenditure was set at 860 billion riyals, budget data show. Spending in 2014 is estimated to have been 1.1 […]

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Saudi Arabia Maintains Spending Plans in 2015 Despite Oil Slide

ENLARGE Saudi King Abdullah struck a note of caution in the budget announcement. Reuters/Saudi Press Agency/Handout DAMMAM, Saudi Arabia—The Saudi government unveiled a 2015 budget on Thursday that signaled a continuation of a high level of spending despite pressures from a steep fall in oil prices in recent months. The kingdom, the world’s top oil exporter, depends on oil revenue to fund social spending, helping head off the kind of unrest that has roiled Middle Eastern countries since 2011. A prolonged oil-price slump could threaten such policies here and in other Gulf monarchies. Saudi King Abdullah struck a note of caution in the budget announcement, instructing officials to consider the developments that led to oil’s decline by “rationalizing the expenditure.” Riyadh has chosen not to cut output in an effort to push up prices, despite its dependence on oil exports. The Saudi oil minister, Ali al-Naimi—secretary-general of the Organization […]

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Oil Trades Above $60 Amid Signs of Saudi Confidence in Rebound

Oil traded above $60 a barrel in London amid the highest volatility in more than three years on speculation that Saudi Arabia , the largest crude exporter, is signaling confidence that prices will rally. Brent futures swung between gains and losses. Saudi Arabia’s assumption of oil at $80 a barrel next year is sending a message that the government expects a price rebound, according to John Sfakianakis, a former economic adviser to the kingdom’s finance ministry . Implied volatility for at-the-money options this week increased to the highest since October 2011, data compiled by Bloomberg show. Oil has slumped 46 percent this year, poised for the biggest drop since 2008, as the Organization of Petroleum Exporting Countries resisted supply cuts to defend market share while the highest U.S. production in three decades exacerbated a global glut. Crude prices are “fair” at about $70 to $80 a barrel, Iraq ’s […]

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Iran Exits Recession With 4% Growth in Six Months, Rouhani Says

Iran ’s economy expanded 4 percent in the six months from March 21, President Hassan Rouhani said today, in a return to growth following two years of recession. In the 16 months since it came to power, the government has also “curtailed inflation from 40 percent down to 17” percent, Rouhani said in a speech in the eastern city of Birjand, according to the Iranian Students News Agency . “Economic revival has begun.” Efforts to secure a deal with world powers over the Islamic Republic’s nuclear program have won Iran some relief from economic sanctions, though talks on a permanent deal have been extended until July amid major differences. A 45-percent plunge in the price of crude this year threatens to slash oil revenues that account for the bulk of government spending. Rouhani today blamed “plots” by nations he didn’t name for driving down the price of crude. Oil […]

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