Crude Oil Slid to 5-Year Low

Brent at $57.88

 

Crude oil slid on Monday to a five-year low amid speculation the global oil supply glut will continue. WTI sank 2.1 percent to $53.61 in New York, and Brent crude slid 2.6 percent to $57.88 in London.

UPDATE: Iraqi Oil Minister Adel Abdul-Mahdi said on Monday that Iraq supports Saudi Arabia’s decision not to cut oil output levels.  Iraqi decision to maintain oil production levels was announced when oil prices hit a five-year low.

Meantime, Russian ruble dropped 7 percent to 59.10 per dollar after Russia’s Economic Development Ministry announced on Monday that the country’s economy shrank by 0.5 percent in November, Russia’s first decline in five years. The ministry said sharp drop in manufacturing and investment led the economic downturn. 

Russia to Begin Food Imports from Iran – Paid in Ruble

Russia will begin food imports from Iran in January 2015 and may pay for them in Russia ruble, Russia’s Tass news agency reported today.

The exchange value of Russian ruble against the dollar plummeted this year. Iran would have normally quoted the price of its food product exports to Russia in dollar, which would have been quite expensive for the Russian buyers when converted to ruble. Based on this report, Iran has apparently agreed to accept ruble for its food products. Iran is to export some 20,000 tons of trout and 3,000 tons of shrimp to Russia next year, as well as some dairy products.

The agreement covers bilateral food trade. It was not clear what food products Iran could import from Russia and pay for them in rial. The announcement only covered Iranian exports to Russia.

File photo: Russian ruble.

Iran Offers Deepest Oil Discount in 14 Years

Brent Plunges below $60

Bloomberg reported today that Iran was offering its main crude grade to customers in Asia at the deepest discount in 14 years. National Iranian Oil Company (NIOC), taking a cue from Saudi Aramco, cut its official selling price for January shipment of light crude to a discount of $1.80 a barrel below the regional benchmark. Bloomberg said light crude grade hasn’t sold at such a deep discount since it began tracking the country’s official selling price in March 2000. Iran also deepened the discount for Iran Heavy crude to $3.51 a barrel for January delivery to Asian customers, deepest discount since December 2008.

Meantime, the Brent crude price plunged today below $60 a barrel mark, trading at $59.07 - Crude has fallen 45 percent this year, amid strong signs that OPEC is reluctant to tackle the glut. UAE’s energy minister said on Sunday that OPEC will refrain from cutting output even if oil prices fall as low as $40 a barrel.

In Russia, the dramatic central bank decision in wee hours this morning to raise the interest rate to 17 percent failed to slow down the fall of the ruble. In fact ruble dropped to new lows today, trading above 70 rubles to the dollar. The national currency has lost half its value in less than 6 months.

Oil Prices Continue Falling

Russia Raises Interest Rate to 17% to Shore Up Ruble – Rial Tumbles to 35,000 against the Dollar

 

Oil prices continued falling today, with Brent crude closing at $60.51 a barrel. A Bloomberg survey of 17 oil analysts on Sunday showed they expect the prices slide to as low as $50 a barrel in 2015. The UAE oil minister said today in Abu Dhabi that OPEC would not intervene by limiting output even if the price hits $40 a barrel.

In Russia, the plummeting oil prices caused the ruble tumble past 64 against the dollar for the first time. In January, the rate was 33 rubles per dollar; meaning the national currency has lost half its value this year. Russia has spent $80 billion of its foreign-exchange reserves in an unsuccessful attempt to prop up the ruble.

The Russian Central Bank, after an unusual early morning emergency economic meeting in Moscow, announced at 1 a.m. local time on Tuesday that it would raise its key interest rate to 17 percent from 10.5 percent, effective Tuesday, to shore up the ruble. The 17-percent interest rate, although it could strengthen the ruble in the short term, could significantly slow the country’s economy, which is already under sanctions for Crimea annexation.

The economies of Venezuela, Nigeria, Iraq and Iran are also under severe pressure from the falling oil prices. Venezuela might not be able to pay loan payment of more than $21 billion in 2015, which will force the country into default. Nigeria has devalued its currency to lowest levels seen. And Iranian currency rial today traded at 35,000 against the dollar, a loss of 20 percent in value since January. Iraq, in the midst of a growing war, can also ill afford the $60 oil.