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Rosneft, Exxon Combine in Africa Even Amid Russia Sanctions

OAO Rosneft and Exxon Mobil Corp. bid for licenses in Mozambique, forging ahead with a partnership strategy even as U.S.-Russia relations remain tense. Russia’s largest oil producer and Exxon submitted joint bids in Mozambique’s fifth licensing round to explore the Angoche Basin and Zambezi Delta, according to a statement on Rosneft’s website confirmed by Exxon. “Partnerships with global industry leaders, such as Exxon Mobil, allow the company to minimize the risks in the implementation of frontier exploration projects,” Rosneft said. If the bids succeed, Exxon would operate the project, according to Rosneft. The Russian company and Irving, Texas-based Exxon Mobil already produce oil together off the coast of Russia’s Sakhalin Island. They also have explored Russia’s arctic seas, an area now subject to U.S. and European Union sanctions on offshore technologies prompted by Russia’s role in Ukraine. Working together elsewhere in the world may be a way for the […]

Posted On : Published By : Tom Whipple
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Oil at $40 Seen Less of a Blow to Russia as Economy Adjusts

Eleven months of surviving with oil below $100 have left Russia hardened enough to endure a monthlong drop to $40 a barrel, a survey of economists showed. Crude at that level will push the economy to a contraction of 5 percent this year and 1 percent in 2016, before it rebounds to 0.8 percent growth in 2017, according to the median of 20 estimates. The central bank said in June the economy will shrink every year through 2017 if oil remains at $40. The ruble’s crisis last year underscored the vulnerability of the world’s biggest energy exporter to slumping oil, which together with gas accounts for about half of budget revenue. The latest forecasts reflect Russia’s move to loosen its reins over the currency and allow consumer demand to absorb the shock of last year’s collapse. “During the first half of 2015, the economy has already adjusted to some […]

Posted On : Published By : Tom Whipple
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Russia Calling Off Dollar Buying Bolsters Ruble as Oil Slides

The ruble ended five days of losses as the Bank of Russia said it was stopping daily purchases of foreign exchange, signaling policy makers don’t want to add impetus to the currency’s decline before an interest-rate decision this week. While the ruble strengthened as much as 1.4 percent after the central bank said it was suspending a program of buying as much as $200 million daily, the exchange rate quickly gave up most of those gains as Brent crude slid toward a six-month low. The move by the Bank of Russia followed a five-day rout that almost ended this year’s appreciation and weakened the ruble beyond 60 to the dollar for the first time since March. “The ruble pushing above 60 was a tipping point,” Daniel Hewitt, an analyst at Barclays Capital Plc in London, said by e-mail. “Foreign-currency purchases were using up foreign exchange available on the market […]

Posted On : Published By : Tom Whipple
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Vladimir Putin’s most effective weapon is gas – but not the poison kind

The logo of Gazprom is pictured at the 26th World Gas Conference in Paris, France, June 2, 2015. At face value, Russia’s $400 billion deal to supply natural gas to China National Petroleum Corporation, via the state-controlled energy behemoth Gazprom, sounds like a coup for Moscow. But according to recent analysis, the deal is strongly tilted in China’s favor. Gazprom will be lucky to break even on the contract and may even lose substantial amounts of money. While the deal may not make economic sense for Gazprom, it does fit with Vladimir Putin’s broader geopolitical “tilt to Asia” strategy, and represents “a desperate geopolitical gambit trumping all economic rationale,” according to analysis by the Chatham House, a UK policy institute. In fact, the CNPC deal is just one example of how Gazprom operates more as an instrument of Putin’s political ambitions and Russian state power than as a rational […]

Posted On : Published By : Tom Whipple
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Ruble Sinks With Oil as Bets for Rate-Cut Pause Hit Russia Bonds

The ruble fell to a four-month low as Brent crude extended losses in a bear market, boosting wagers for Russia’s central bank to limit interest-rate cuts this week to avoid accelerating the selloff. As the currency weakened as much as 2.4 percent against the dollar, forward-rate agreements showed traders trimming bets for policy easing to the lowest since December. Royal Bank of Scotland Group Plc and Credit Suisse Group AG said the Bank of Russia may opt to keep interest rates on hold on July 31 to avoid exacerbating the ruble’s slump and stoking inflation. Russian bonds decreased for a sixth day. “Should oil and the ruble continue falling in the coming days, this could reduce room for decisive policy easing” even though the state of Russia’s economy warrants a larger rate cut, JPMorgan Chase & Co. analysts including Anatoliy Shal said in an e-mail to clients. While all […]

Posted On : Published By : Tom Whipple
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Bleak outlook for oil has Russian investors pulling back

Market analysts are predicting a worse outlook for the prices of crude oil, Russia’s biggest export. Photo by Shutterstock MOSCOW, July 27 (UPI) — As international sanctions push Russia toward its first recession since 2009, market analysts are predicting a worse outlook for the prices of crude oil, the country’s biggest export. The bleak outlook for the price of crude oil has prompted money managers at Franklin Templeton Investments and Paribasto to cut back in Russia, Bloomberg reported. "For now there’s stability, but the price of oil seems to be settling in at a new normal," Ruchir Sharma, the head of emerging markets at Morgan Stanley Investment Management, told Bloomberg Business. "It’s a stability, but stability with stagnation. I don’t know how long they can coexist, but this seems to be the prognosis for now." Brent crude oil dropped 19 percent from this year’s high as the ruble went […]

Posted On : Published By : Tom Whipple
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Ruble Close to Erasing 2015’s Gains as Oil Spurs Inflation Risk

The ruble weakened past 60 against the dollar for the first time since March, tracking the price of oil and raising the likelihood that Russia’s central bank will hold off on cutting interest rates this week. The currency fell 1.1 percent to 60.32 per dollar by 10:23 a.m. in Moscow. Government bonds known as OFZs fell for a seventh day, with the yield on five-year securities climbing nine basis points to 11.17 percent. The ruble is less than 1 percent away from erasing this year’s gains after posting five straight weekly drops, potentially spurring the cost of imports and jeopardizing the Bank of Russia’s efforts to curb inflation. This presents a “difficult choice” to policy makers before they meet to decide on interest rates on July 31, according to Capital Economics. The central bank has lowered rates four times this year to support the slowing economy. “On the one […]

Posted On : Published By : Tom Whipple
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Investors Flee Russia as Morgan Stanley Sees Long Market Chill

Russia’s cooling market climate has spurred an exodus of international investors. And the forecast calls for the cold snap to linger. A worsening outlook for the price of crude, the country’s biggest export, and international sanctions that are pushing Russia toward its first recession since 2009 have prompted money managers at Franklin Templeton Investments and BNP Paribas SA to retrench. With the world’s largest energy exporter so dependent on oil, which along with natural gas accounts for half its budget revenue, Morgan Stanley predicts “a long winter” absent any other growth drivers. “For now there’s stability, but the price of oil seems to be settling in at a new normal,” Ruchir Sharma, the head of emerging markets at Morgan Stanley Investment Management, said in an interview at Bloomberg headquarters in New York. “It’s a stability, but stability with stagnation. I don’t know how long they can coexist, but this […]

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Russia, China Delay “Holy Grail” Gas Pipeline Sequel As China’s Economy Swoons

Last month in “ PetroYuan Proliferation: Russia, China To Settle ‘Holy Grail’ Pipeline Sales In Renminbi ,” we outlined how Moscow was set to deliver some 68 bcm/y in natural gas to China via the Power of Siberia line and the “Western Route”, or the “Altai” line. Here’s a quick recap: In May, Chinese President Xi Jinping visited Moscow, where Gazprom Chief Executive Alexei Miller and China National Petroleum Corp Vice President Wang Dongjin signed a gas export deal which paves the way for 30 bcm/y to China via a new “Western Route.” Last year, the two countries ratified a “Holy Grail” gas deal for the delivery of up to 38 bcm/y over 30 years via an “Eastern Route.” Also known as the “Power of Siberia” pipeline, the Eastern route was billed as the largest fuel network in the world with a total contract value of around $400 billion. […]

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Ruble Falls for Fifth Week Tracking Oil as Russia’s RTS Slides

The ruble fell, extending the longest weekly slump since November, and bonds declined as the selloff in oil drove the price of Brent to a three month-low. A dollar-denominated gauge of stocks entered a bear market. Russia’s currency weakened 1.1 percent against the dollar to 58.4980 by 6:47 p.m. in Moscow. It declined 2.6 percent this week, the most since the period ended June 7. The RTS Index extended the retreat from its peak in May to more than 20 percent. Oil, which along with natural gas accounts for half Russia’s revenue, has tumbled in London and entered a bear market in New York amid a persisting surplus. The ruble’s correlation with oil rose to 0.47 this week, the highest level in two years, according to data compiled by Bloomberg. “The ruble is a petrocurrency, and oil is on another leg down,” Vladimir Miklashevsky, a strategist at Danske Bank […]

Posted On : Published By : Tom Whipple