Russian ruble falls amid lower oil prices

Posted On: September 22, 2014

The Russian ruble lost 0.3 percent to 38.54 against the U.S. dollar this morning, Bloomberg reported. The dip was the steepest in emerging Europe and Africa. Russian stocks have dropped following arrests of major investment firm officials. Crude oil was also on the decline surrounding Western sanctions and the impending rate increase from the U.S. Federal Reserve.

"Oil is falling and that's pressuring the ruble," Maxim Korovin, fixed-income analyst at VTB Capital in Moscow, told Bloomberg. "A combination of declining oil and investors' switch into dollar assets on expectations of the Fed's tightening monetary policy are weighing on the currency."

The sanctions imposed by Europe and the U.S. affect an estimated 100 million tons of annual oil production, accounting for roughly 20 percent of Russia's entire output, according to the Moscow Times. Russian oil experts wondered how long the industry could rely on its own means for oil extraction.

Currently, 25 percent of Russia's oil production relies on fracking – a process that uses high-powered, largely U.S.-manufactured pumps. As traditional oil wells run dry, Russian dependence on fracking should increase, further compounding the effects of the Western sanctions.

With the recent developments, the ruble faced significant currency risk.

Category: Industry News

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