Russia ETF Rallies With Oil on Bets Supply Supply Glut Will Ease

  • Energy companies make up 40% of largest Russia-focused ETF
  • Russian ADRs rose as Brent gained to a one-month high

The largest exchange-traded fund tracking Russia’s stocks rose to a two-week high as a surge in oil prices boosted the outlook for the energy companies that make up about 46 percent of its underlying assets.

The Market Vectors Russia ETF jumped 2.4 percent to $16.44 in New York. A Bloomberg gauge of U.S.-traded Russian stocks gained for a second day as oil producers Lukoil PJSC and Surgutneftegas OJSC each rose at least 3 percent.

Russian equity assets advanced as Brent crude rallied above $51 a barrel amid mounting speculation that declining U.S. output will ease a global supply glut. The world’s largest energy exporter’s economy has slumped into its first recession since 2009 as oil selling for about half its five-year average price exacerbated the impact of international sanctions linked to the Ukraine conflict. Tuesday’s gain pushed the Market Vectors Russia ETF’s advance to 14 percent from a seven-month low on Aug. 24.

“There is some hope in the market that the decrease in crude production in the U.S. is a sign that the supply glut will be alleviated, which is positive for a country that is anxious to see the oil price go up,” Sergei Pigarev, an analyst at Rye, Man & Gor in Moscow, said by phone from Moscow on Tuesday. “The correlation is clear: The more oil goes up, the more confidence investors have not only in Russia’s oil producers, but the entire market.”

Lukoil, Surgut

Policy makers in Moscow are debating a mix of measures to cover a widening budget deficit. The government is close to canceling a planned cut in oil-export duty next year, which will save about $3 billion, Economy Minister Alexei Ulyukayev said Friday on state television.

The Market Vectors Russia ETF’s three-day advance pushed its 14-day relative strength index to 57, data compiled by Bloomberg show. Some technical analysts see an RSI of 70 as a signal that a security may be poised for a decline.

Lukoil jumped 3.1 percent to $34.95 in New York. Surgut advanced 3 percent to $5.56. The Bloomberg Russia-US Equity Index rose 1.2 percent to 49.07. Futures contracts on the dollar-denominated RTS Index expiring in December added 0.3 percent to 82,890 in U.S. hours. Moscow-based aluminum producer United Co. Rusal gained 1 percent to HK$3.19 at 10:48 a.m. in Hong Kong, rising for a fifth straight day.

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