Oil rising faster than Ruble boosts Russia’s fiscal outlook

Bloomberg

The outlook for Russia’s earnings from oil exports is improving as the price of a barrel of crude in ruble terms rose to the highest in more than five months.
The currency’s 2.8 percent advance this month has lagged a gain of 18 percent in Brent crude, which is used to price Russia’s main export blend. The exchange rate’s relative weakness means the government is earning more from sales of the dollar-denominated commodity. The ruble was little changed at 65.18 per dollar by 12:33 p.m. in Moscow as Brent rose 2.4 percent to $46.84 a barrel, or 3,052 rubles.
The oil-price recovery is bringing relief to the government as it seeks funds to bridge what analysts project will be the biggest budget deficit as a percentage of economic output since 2010. This year’s fiscal plan was based on the state receiving 3,165 rubles for each barrel it sells. The price fell to as low as 2,245 in January.
“The ruble lagged oil on its way down, and now it’s lagging on the rebound,” said Konstantin Artemov, a money manager at Raiffeisen Asset Management in Moscow. “In our understanding, the equilibrium price is around 3,000 rubles per barrel.”

Bonds Gain
Russia may not be able to meet its goal of keeping its budget deficit at 3 percent of gross domestic product this year, First Deputy Finance Minister Tatiana Nesterenko said on April 20.
The share of oil and gas income in its budget revenue shrank to about a third in the first quarter from more than 50 percent several years ago.
“At the moment, it’s hard to believe in sustainable appetite for the ruble below 65” said EvgenyKoshelev, an analyst at SocGen’sRosbank PJSC unit in Moscow.