Russia: Decrease in Russian exports softens markedly in August
October 3, 2016
In August, Russian exports totaled USD 22.7 billion, which marked a 9.5% annual contraction (July: -17.5% year-on-year) and represented the softest decrease since October 2014. Imports totaled USD 18.3 billion, which marked a strong rebound over the USD 16.3 billion recorded in August 2015, increasing 12.7% year-on-year and representing the fastest expansion in over three years.
Russia’s trade surplus totaled USD 4.4 billion in August, notably below the previous month’s USD 6.5 billion. On an annual basis, the trade surplus in August was significantly below the USD 8.9 billion surplus recorded in the same month last year. August’s result prompted the 12-month rolling surplus to decrease to USD 99.5 billion, the smallest accumulated surplus in over a decade.
The extraordinary meeting of the OPEC Conference in Algiers in the last week of September concluded with a commitment to freeze oil production at between 32.5 and 33.0 million barrels a day, in stark contrast to market expectations. Analysts expect the commitment to be honored by most members at OPEC’s official meeting in November. The re-establishment of OPEC’s price leadership prompted global oil prices to spike, including for Urals oil. On 30 September, the price for Urals oil settled at USD 46.3 per barrel, which was 4.6% higher than at the end of August. Urals oil has also recovered from the lows registered earlier this year and was 31.8% on a year-to-date basis.
OPEC’s shift in strategy underlines the deterioration in oil market fundamentals over the course of 2016, contrasting analysts’ previously held expectations that the market would gradually rebalance. OPEC’s apparent reversal in strategy is however expected to take time to materialize. Reduced production and exports are not expected to be discussed with OPEC’s consumers until December at the earliest, with the impact on balances taking place in Q1 2017.
Author: Ricardo Aceves, Senior Economist