Russian ruble falls in first 2016 trade
January 11, 2016, 9:39 am

Against the dollar, the ruble is trading 20 per cent lower than in 2014 [Xinhua]

The ruble fell over two per cent to 76.1 against the US dollar in early Monday trading largely on plummeting oil prices and a growing fear that an energy rebound is unlikely in 2016.

Shortly after noon Moscow time, the ruble began to regain some ground at 75.42.

The international benchmark Brent Crude fell over 2.5 per cent to $32.66 a barrel while US benchmark West Texas Intermediate (WTI) crude was down about 2.3 per cent to $32.39.

Analysts say that low demand – particularly in China, oversupply, warmer-than-expected temperatures in North America and dwindling storage capacity have all contributed to the dramatic 10 per cent drop in energy prices in the first 11 days of the new year alone.

Oil prices are now at a 14-year low and – if Goldman Sachs forecasts are to be believed – could fall to $20 a barrel.

Russia is a major oil producer and exporter and in previous years saw its coffers filled as the price of a barrel was over $110.

However, as oil prices began to rapidly plummet over the past two years – coupled with US and European Union sanctions over the crisis in Ukraine – Russia’s fortunes were reversed.

The growing oil glut is likely to frustrate Russian officials who had expected the economy to turn the corner – the ruble had been gaining on the dollar for most of 2015 – and away from contraction.

The ruble is now at its lowest level since 2014.

The drop in the ruble comes on the heels of a report from the economy ministry that showed that the economy contracted 3.7 per cent during the January-to-November period.

It contracted four per cent in November alone.

Both the government and the International Monetary Fund expect GDP contraction for 2015 to be at 3.8 per cent. Russian officials had previously said the economy had turned the corner and come out of recession.

The BRICS Post with inputs from Agencies