Global oil prices and the price for Urals oil continue to recover, which is having a positive impact on investor confidence in Russian assets and therefore on the ruble. The free fall that the price for Urals oil experienced in the second half of 2014 was declared over when it hit rock bottom at USD 43.3 per barrel in mid-January and rebounded sharply in the following weeks. On 7 May, the price for Urals oil traded at USD 64.9 per barrel, which marked the highest level since early December 2014. The improvement seen in global oil prices is mainly the result of a drop in U.S. oil inventories in April—the first drop in four months—and a decrease in production from conflict-hit Libya.
The rise in oil prices has encouraged investors’ confidence in Russian assets, thus prompting the Russian ruble to strengthen against the U.S. dollar. At the end of April, the ruble traded at 51.7 RUB per USD, which was 11.2% stronger than at the end of March when the ruble traded at 58.5 RUB per USD. Although an annual comparison shows that the ruble was still 44.8% weaker in April, on a year-to-date basis the Russian currency has made a remarkable comeback.
The combination of a decrease in foreign external debt and less capital outflows at the beginning of 2015 also gave support to the Russian currency. Recent data from the Russian Central Bank showed that capital outflows totaled USD 32.6 billion in the first quarter this year, which was less than half the USD 77.4 billion registered in the fourth quarter. Moreover, Russia’s total external debt fell from USD 597 billion in Q4 2014 to USD 559 billion in Q1 of this year. The decrease mainly reflects continued deleveraging in Russia’s corporate sector as Western sanctions have restricted firms’ access to global credit markets and thus limited debt inflows into the economy.FocusEconomics Consensus Forecast panelists see the Russian ruble trading at RUB 61.8 per USD at the end of 2015 and at RUB 58.1 per USD at the end of 2016.