The rouble has become the world’s best-performing currency this year, boosted by measures – including restrictions on Russian households withdrawing foreign currency savings – taken to shield Russia’s financial system from Western sanctions imposed after Moscow sent troops into Ukraine on Feb. 24.
The strong rouble raised concerns among officials and export-focused companies as it dents Russia’s income from selling commodities and other goods abroad for dollars and euros.
Many Russian companies, primarily non oil-and-gas exporters, are already suffering financially, said Evgeny Suvorov, an economist at CentroCreditBank.
Finance Minister Anton Siluanov said Russia could cut state spending and channel funds for foreign currency interventions to keep a lid on the rouble’s strengthening which threatens budget revenue.
The rouble pared gains after the comment and was 0.4% weaker on the day at 52.00 to the greenback at 1154 GMT after hitting 50.01.
Proceeds from commodity exports, a sharp drop in imports, and month-end tax payments in roubles by export-oriented Russian firms are further factors behind the currency’s gains.
“The rouble (is) set to retreat over the coming days… With the month’s main tax payments now in the rearview mirror, hard currency purchasers may begin to step in,” Sberbank CIB said in a note.
The rouble is up nearly 44% year-to-date on the Moscow Exchange but remains much weaker at banks. VTB, Russia’s No.2 bank, offered to sell cash dollars and euros at 63.45 and 67.85, respectively.
Deputy Prime Minister Andrei Belousov said this month that industry would be more comfortable if it fell between 70 to 80 against the dollar.
Against the euro, the rouble was 0.6% stronger at 54.20, having earlier climbed beyond 53 for the first time since April 2015.
The Kremlin, which has hard currency from oil and gas revenue to make the scheduled payments on the debt, has rejected the designation, calling it artificial and engineered by Western sanctions.
Just before Russia embarked on what it calls its “special military operation” in Ukraine, the rouble traded near 80 to the dollar and 90 against the euro. At that time it traded in free-float mode and, unsupported by capital controls, got hammered due to fears of sanctions.
On the stock market, the dollar-denominated RTS index fell 1.1% to 1,449.1 points. The rouble-based MOEX Russian index was 1% lower at 2,384.5 points. – https://money.usnews.com/
Shell Warns Spare Oil Capacity Is Running Very Low
- Shell CEO van Beurden: spare capacity is running very, very low.
- van Beurden: demand for oil and gas is still recovering despite the current economic and pandemic challenges.
- Shell: it will be impossible to cover the entire pipeline gas capacity out of Russia with LNG.
Global spare capacity is running very low, which will keep oil and gas markets on edge for some time, according to the chief executive of supermajor Shell.
“Spare capacity is running very, very low,” Shell’s CEO Ben van Beurden said on Wednesday, as carried by Reuters.
While global spare energy capacity continues to deplete, demand for oil and gas is still recovering despite the current economic and pandemic challenges, van Beurden told reporters.
“I do believe that we’re going to be facing quite a bit of uncertainty in markets for some time to come,” Shell’s top executive added.
Global spare capacity for crude oil production is believed to be held mostly by the large producers in the Middle East, such as Saudi Arabia and the United Arab Emirates (UAE). However, Saudi Arabia, the world’s biggest crude oil exporter, has never tested the 12 million bpd capacity it claims to have, while it has never produced more than 11 million bpd for a prolonged period.
In addition, global refining capacity lost around 3 million bpd of processing capacity in the wake of COVID and the crash in demand, as refiners opted to close some money-losing facilities, also because of uncertain oil demand trends going forward. Shell was also among the refiners who downsized refining operations in 2020, with a view to be a net-zero emissions business by 2050 or sooner.
In the gas market, where Europe is scrambling to procure non-Russian supply, capacity to meet demand is also low. According to the chief executive of Shell, which is also a top LNG trader, it’s impossible for LNG to replace all Russian pipeline gas.
“I think it will be impossible to cover the entire pipeline gas capacity out of Russia with LNG,” van Beurden told reporters.
“If we are not going to take significant measures, like for instance energy savings, maybe a certain degree of rationing, it will be problematic,” he added. – By Tsvetana Paraskova for Oilprice.com
USNEWS.COM / REUTERS / OILPRICE.COM