Ruble Climbs With Oil as $15 Billion Tax Bill Bolsters Demand

  • Russian bonds gain, pushing yield down most in more than week
  • Citigroup recommends buying ruble as proxy for oil with carry

The ruble strengthened for a second day as oil extended gains and exporters bought the local currency to prepare for almost $15 billion of tax deadlines this month.

Russia’s currency advanced 0.8 percent to 77.749 against the dollar by 7:50 p.m. in Moscow as Citigroup Inc. recommended buying the ruble, saying it worked as an oil proxy with “better carry.” Government bonds rose, pushing the yield on five-year notes down nine basis points to 10.34 percent.

Oil advanced for a second day even as major producers curb Iran loaded its first cargo to Europe since international sanctions ended. Citigroup said that while it’s difficult to predict a bottom in the oil market , it noted a potential for shale under investment and saw stabilizing factors for the ruble, including the country’s current-account surplus. Before the end of the month, some support will come from exporters, which must pay $14.6 billion of taxes, ING Groep NV said on Monday.

"Exporters have been supporting the ruble last week and this factor will likely remain intact this week," said Dmitry Polevoy, an economist for Russia at ING in Moscow. Oil still remains the long-term driver of the ruble, he said.

Russia has been forced to consider budget cuts as it receives less per barrel of oil than it expected for revenue. Russia’s current-account surplus narrowed to $6.1 billion in January from a surplus of $11.1 billion the previous year, the Bank of Russia said Feb. 9. 

Dynamic Economy

Still, Russia’s economy "has been more dynamic in the absorption of the macro challenges triggered by falling energy prices" compared with most oil producers in the Middle East, Luis Costa, a strategist at Citigroup in London, wrote in a report, saying analysts expected a current-account surplus of $30-$35 billion this year.

Oil, Russia’s biggest export earner, rose 0.6 percent to $33.55 a barrel in London after gaining 11 percent on Friday. The price in rubles slipped 0.2 percent to 2,608, while the government budget for 2016 had planned on an average of 3,165 per barrel.

The Micex Index of stocks rose 0.7 percent. Gazprom PAO, the nation’s biggest natural-gas exporter, jumped 1.6 percent, and Lukoil PJSC, the largest private oil producer, climbed 1.4 percent, the most since Feb. 5.

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