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Russia’s central bank frets over oil price and sanctions pressure

Low oil prices and restrictions to foreign capital means basic structures of Russian economy are fragile, the head of the Russian Central Bank said. Photo by DyMax/Shutterstock MOSCOW, Nov. 13 (UPI) — Lower crude oil prices and restricted access to foreign capital markets means dwindling funds for Russia, the country’s central bank chief said. Elvira Nabiullina, the head of the Russian Central Bank, said Friday the general bank portfolio quality in Russia was diminishing under the strains on the economy. Lending is moving in some sectors, though the share of overdue loans on the books is increasing across the board. The bank in September said it was keeping its key interest rate at 11 percent because of the risks of high inflation and "persistent" cooling in the Russian economy. Lower crude oil prices hurt exporting economies like Russia’s and, last week, Nabiullina said there may be a prolonged downturn […]

Posted On : Published By : Tom Whipple
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Bank of Russia Warns of Economic Risk From Saudi Oil Competition

Russia’s central bank warned that increased competition from Saudi Arabia in Europe, the destination for almost 70 percent of the nation’s oil exports, is creating new risks for its economy. As Saudi Arabia ships oil to new markets in the Europe, the price discount of Russia’s Urals crude blend to regional benchmark Brent is widening, Bank of Russia’s research and forecasting department said in a bulletin published on its website Thursday. The discount in Rotterdam has increased to $3.50 a barrel, up from its “usual” level of no more than $2, it said. “Oil supplies to Europe from Saudi Arabia are probably adversely affecting Urals prices,” the central bank’s researchers wrote. That creates additional risks for Russia’s exports, budget and balance of payments, according to the bulletin. Russia, which relies on energy for almost half of its government revenue, faces its first recession in six years amid a commodities […]

Posted On : Published By : Tom Whipple
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Oil output from Russian arctic waning

Russian official says a lack of infrastructure in the far north is leading to a decline in oil production. Photo by NASA/UPI SALEKHARD, Russia, Nov. 9 (UPI) — A lack of infrastructure in the arctic north of Russia is putting a moderate throttle on the region’s oil production, an area governor said. Dmitry Kobylkin, governor of the Yamal-Nenets autonomous district, told Russian news agency Itar-TASS regional production could grow along with regional development, but the lack of infrastructure was curbing year-on-year output. Last year, he said an estimated 158 million barrels of oil were produced from the Yamal Peninsula . Full-year 2015 is expected at around 152 million barrels. "The drop in oil production, despite the fact that there are sufficient reserves in the area, is caused only by infrastructure constraints that hamper commercial development of new deposits," the governor said. Oil work in the pristine arctic environment has […]

Posted On : Published By : Tom Whipple
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How the Unshackled Ruble Has Changed Russia’s Economy Forever

Today marks the one-year anniversary of when the ruble was set free for the first time in its post-Soviet history. In five charts, we show how the central bank’s decision to stop depleting international reserves to prop up the currency has upended every facet of the Russian economy, from decimating wages to enriching oil exporters. 1. Runaway Inflation The ruble has shed about 30 percent against the U.S. dollar, stoking inflation to a 13-year high that the central bank sought to counter with repeated interest-rate hikes up to 17 percent last December. The Bank of Russia has since unwound much of that emergency rate increase. 2. Rising Poverty Runaway inflation eroded consumers’ purchasing power. The resulting drop in wages and disposable income has been so dramatic as to make more Russians destitute. The World Bank predicts Russia will experience for the first time since the 1998-1999 financial crisis a […]

Posted On : Published By : Tom Whipple
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Another Year of Sanctions? Russian Bond Issuers Can Ignore Them

Russia can disregard sanctions for another year — at least from the bond market’s perspective. A 44 percent drop in Eurobond maturities to $16.7 billion in 2016 means borrowers can ride out penalties in 2016 that have frozen state oil giant Rosneft OJSC and the nation’s largest lender Sberbank PJSC out of the capital markets since July 2014 and raised borrowing costs for others. Support from government loans and a cushion of current-account surpluses will be enough to keep Russian companies current on payments, according to Giuliano Palumbo, a Milan-based money manager at Arca SGR. With little need to sell debt abroad, Russian companies may prolong a drought of Eurobond issuance after year-to-date sales slumped to the lowest since 2001, according to data compiled by Bloomberg. The hiatus in borrowing in 2016 may not last as a maturity wall of $72 billion hits corporate and sovereign issuers in the […]

Posted On : Published By : Tom Whipple
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Ruble Gets Respite on Oil as Rabobank Sees Bulls Trimming Bets

The ruble climbed for the first time in three days as oil advanced, while hedge funds trimmed their bullish bets on the currency last week amid risks a Federal Reserve rate increase will exacerbate Russia’s economic slowdown. The ruble strengthened 0.3 percent to 64.4220 per dollar by 12:46 p.m. in Moscow, after posting a 1 percent drop in the five days through Nov. 6, its third week of declines. Bonds fell for a second day, lifting the yield on the government’s five-year local debt from a one-year low last week. Hedge funds and other large speculators reduced their bullish bets on the ruble for the first time in six weeks, reflecting concern the U.S. Fed will raise interest rates next month. While Russia’s local benchmark rate is still high at 11 percent and supports demand for investors seeking higher yields, appetite will be dented by any slide in the […]

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Sechin: Russia can meet Japan’s entire demand for LNG

One of the most powerful men in Russia, Igor Sechin, says reserves are on hand to meet all of Japan’s demand for liquefied natural gas. File photo by Stephen Shaver/UPI TOKYO, Nov. 6 (UPI) — One of the most powerful men in Russia said the country has the reserves on hand to satisfy Japan’s entire demand for liquefied natural gas. "Gas resources are available and we are ready to satisfy all Japan’s gas demands on the account of our resources," Igor Sechin , the chief executive officer at Russian energy company Rosneft, said. Sechin opened the door Friday to Japanese investments in LNG development plans in the Far East. The invitation came as Russian Prime Minister Dmitry Medvedev outlined a $1.1 billion investment program for development in eastern Russia. Sechin, who served as deputy prime minister in President Vladimir Putin’s government until 2012, said Rosneft is ready to extend […]

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OPEC, Russia oil battle heats up as Sweden buys Saudi crude

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria, August 21, 2015. The Saudi-Russian battle for Europe’s crude oil buyers intensified this week as Swedish refiner Preem bought its first cargo of Saudi Arabian crude oil in around two decades, trading sources said. The purchase from another traditional buyer of Russia’s Urals crude will heat up the contest for market share that Saudi Arabia has effectively brought to Russia’s backyard in the Baltic region. Already, Poland’s two refineries, PKN Orlen and Lotos, have turned to Saudi crude at the expense of Urals. The deputy head of Lotos earlier this week told Reuters that the purchase "made our negotiation position much stronger" with its traditional supplier, Russia. State oil company Saudi Aramco on Thursday also dropped its official selling prices for crude oil to northwest Europe. Preem, which also predominately […]

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EU regulators look to LNG and away from Russian pipelines

European Union regulators are preparing a strategy to import more liquefied natural gas (LNG) while scrutinizing Russia’s plans to expand its pipeline capacity to Germany, a draft EU document says. The document is part of the European Commission’s efforts to enforce a single energy market, based on regional cooperation and diverse sources of energy shared across the 28-member bloc. In a progress report later this month, Maros Sefcovic, European Commission vice president responsible for energy union, will deliver "a state of the union address". A draft copy, seen by Reuters, says the Commission will early next year announce a strategy for LNG and gas storage to ensure the EU can benefit fully from its "diversification potential". It will stress the importance of the fuel in negotiations with the United States on a trade treaty. At the same time, it referred to a shareholders’ agreement between Russian gas giant Gazprom […]

Posted On : Published By : Tom Whipple
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Russia expects long slump in oil prices

Russian Central Bank is the latest to adopt the mantra of lower for longer when assessing the trajectory for future crude oil prices. Photo by DyMax/Shutterstock MOSCOW, Nov. 3 (UPI) — In a potential blow to a weakened Russian economy, the head of the Russian Central Bank said there may be a sustained slump in crude oil prices. A price of around $45 per barrel for the global benchmark, Brent, is about 45 percent lower than this date in 2014 and about 20 percent below the start of 2015. Weak global economic growth and increases in crude oil production means markets favor the supply side, pushing prices lower. Russian Central Bank Chief Elvira Nabiullina said there may be a prolonged downturn ahead . "The oil market is being structurally transformed, which demonstrates that oil prices may stay low for a long period of time," she said. In September, the […]

Posted On : Published By : Tom Whipple