Russia: Recovery in external sector continues in September
November 15, 2016
Russia’s exports totaled 25.5 billion in September, which was 3.0% lower than the USD 26.3 billion reported in the same month last year. The contraction was slower than the 7.2% decrease observed in August and marked the softest decrease since August 2014. Meanwhile, imports grew 7.9% annually to USD 18.2 billion in October and represented a second consecutive increase after 31 consecutive months of decrease.
The trade surplus was USD 7.4 billion in September, which widened over the USD 4.9 billion surplus recorded the previous month. In annual terms, the trade surplus was still below the USD 9.5 billion surplus recorded in September 2015. September’s result prompted the 12-month rolling surplus to record USD 93.4 billion, the smallest accumulated surplus in 11 years.
Oil prices have risen in recent days on news that OPEC is approaching a deal to reduce output. Brent crude oil—the global benchmark—has extended previous gains, inching towards USD 50 per barrel. In the same vein, the price of Urals oil settled at USD 45.0 per barrel, which was up 0.3% from the same day of the previous month and has recovered some 28% of its value from the lows observed at the beginning of the year. The 14-member cartel, which is responsible for over a third of global oil supply, will meet on 30 November to try to hammer out the details of the first supply cut since the global financial crisis. Technical discussions are being held in the week prior the formal ministerial meeting and OPEC delegates have indicated that talks are advancing, which prompted an increase in investors’ optimism. Certain degree of uncertainty remains for some OPEC members, however. Iraq, OPEC’s second-largest producer, has voiced objections to being included in the deal, as fighting the Islamic State is becoming more expensive.
Much as Brexit did, the victory of Donald Trump in the U.S. presidential election has shaken the world. The most direct impact of Trump’s presidency on the global oil market comes from his threats to quash the Iran deal and re-impose sanctions. Other countries are also involved in the Iran deal (also known as the Joint Comprehensive Plan of Action), so Trump cannot derail the entire deal, but he can certainly derail policy, which could create significant headaches for dollar transactions and investment. In addition, Trump’s promise to unleash U.S. oil and gas production to gain energy independence has done little to calm some market jitters at a time when OPEC and Russia are producing at record-high levels, hence preventing oil stock draws.
Author: Ricardo Aceves, Senior Economist