Russia: Trade surplus improves for a fourth consecutive month in May
June 29, 2016
Russia’s trade balance incurred a surplus of USD 9.4 billion in May, which was higher than the USD 6.8 billion recorded in the previous month. In fact, May’s reading marked the fourth consecutive improvement after January when the trade surplus shrank to an over-six-year low. In year-on-year terms, however, the trade surplus remained well below the USD 15.4 billion registered in May 2015. Still, May’s result prompted the 12-month rolling surplus to decrease to USD 112 billion, which was the smallest accumulated surplus registered since November 2009.
May’s slightly-wider surplus reflected a slower contraction in exports. Russian exports totaled USD 24.0 billion in May, which represented a 21.7% annual contraction (April: -28.8% year-on-year) and the softest drop in 15 months. On the other side of the balance sheet, imports totaled USD 14.6 billion in May, which marked a 4.7% decrease over the same month last year and the slowest decrease since July 2014.
In the first weeks of June, crude oil saw a sustained increase in prices due to a slow rebalancing process in the crude oil markets, which has been exacerbated by a large number of unplanned production outages across the globe. Among these output disruptions are a reduction in Iraqi output amidst power outages, sabotages of pipelines in Colombia, wildfires in Canada, a strike in Argentina that has reduced YPF’s output by 40%, and a continual fall in Nigerian supplies as the Niger Delta Avengers continue their attacks. Further, on 2 June, OPEC celebrated its 169th meeting and, as expected, disagreements between member countries regarding a strategy on oil production reappeared. Despite the disappointing meeting and the lack of consensus for a clear strategy, oil prices continued to rise.
On 23 June, the United Kingdom voted to leave the European Union and the result is expected to generate a period of prolonged global uncertainty with implications for economic growth, monetary policy and commodities markets worldwide. Shortly after official results were announced, the pound sterling tumbled over 11% and stocks fell across the globe, losing a total of USD 2 trillion. Crude oil was not unaffected; prices for WTI and Brent fell by almost 5%. The decline continued on 27 June, with crude oil prices falling further and the British pound plunging to a 30-year low as news of a UK recession spread. In Russia, the price of Urals oils developed similarly to that of the global and U.S. benchmarks and fell to USD 43.2 per barrel, which was 9.4% lower than in the same day of the previous month (28.1% year-on-year). In the following days, these losses reversed course, but volatility persisted.
Author: Christopher Mc Innes, Economist