Azernews.Az

By Bloomberg

The ruble climbed with the price of crude as Credit Agricole CIB predicted the currency will extend its rally. Shares of OAO Surgutneftegas fell on bets the government will dip into the oil producer’s cash pool.

The currency strengthened 0.6 percent to 50.74 as of 12:13 p.m. in Moscow, the first day of trading after a public holiday on Monday. Climbing oil prices and a cease-fire in Ukraine have made the ruble the best performer globally this year with a 20 percent advance.

The ruble’s gains are slowing inflation and allowing the central bank to unwind a string of emergency rate increases aimed at stemming the currency’s 46 percent slump last year. Now government officials are concerned about the ruble’s strength, which reduces budget revenue from exports priced in dollars and hurts local companies’ competitiveness.

“The ruble can appreciate further on higher oil prices and cross the 50 threshold,” Sebastien Barbe, Paris-based head of emerging-markets research and strategy at Credit Agricole CIB, said by e-mail. “That said, the central bank and government will not be very happy beyond this point, as they want to limit the deterioration in external competitiveness. The ruble may find it difficult to appreciate beyond this point on intervention fears.”

Brent crude, which is used to price Russia’s main export blend, jumped 1.6 percent to $65.97 per barrel, rising for the first time in four days. Russia gets about half of its budget revenue from the oil and natural-gas industries.

Surgut’s Cash

Bank of Russia has moved to stem the ruble’s appreciation by reducing the amount of dollars it makes available at repurchase auctions as well as increasing the cost of the funds. The $50 billion program was introduced in October to help companies pay their foreign debts, but as the peak payment period passed, banks used the cash to bet on higher-yielding ruble assets, fueling the currency’s rally.

“Oil is trading above $65 a barrel and major players have returned from the holidays and are catching up on ruble trading,” Alexei Egorov, an analyst at PAO Promsvyazbank in Moscow, said by phone. “50 is the ruble’s fair value, the Finance Ministry and the central bank won’t let it strengthen beyond that level.”

Surgutneftegas’s preferred shares slumped 3.6 percent to 39.415 rubles, the most on the benchmark Micex stock index, which climbed 0.4 percent. The company’s ordinary shares fell 1.1 percent.

With sanctions over Ukraine having severed Russia from the global financial system, President Vladimir Putin is considering releasing some of Surgut’s $34 billion of cash, according to three bankers close to the Kremlin who asked not to be identified because of the sensitivity of the topic.

“This fear of the government coming after Surgut’s money has long been on investors’ minds since the company has such a big cash pile,” Anvar Gilyazitdinov, a fund manager at Rye, Man & Gor in Moscow, said by phone from Moscow. “In light of these rumors, there’s a heightened risk of Surgut not paying or cutting its dividends, which was the main driver of interest for the stock. There’s a risk and I’m very cautious.”