Ruble, Oil Prices Tumble Amid Market Chaos After OPEC-Russia Deal Collapses

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(Article text ©2020 RFE/RL, Inc., Radio Free Europe/Radio Liberty – – March 9, 2020 – article text also appeared at

The Russian ruble fell to a four-year low after oil prices collapsed following a breakup of talks between OPEC leader Saudi Arabia and Moscow.

The ruble tumbled on March 9 by more than 7 percent to nearly 74 to the U.S. dollar, its weakest rate since early 2016.

Meanwhile, the benchmark Brent oil futures were down 25 percent, at $33.89 a barrel, as concerns of an oversupply in the market resurfaced after the so-called OPEC+ grouping, which includes Russia and Kazakhstan, failed to reach an agreement in Vienna last week on extending output cuts to bolster prices.

Compounding the sour mood for equities are fears over the spread of the deadly coronavirus and its effects on the global economy.

Stocks in Tokyo closed down more than 5 percent, while markets in London, Paris, and Frankfurt dropped more than 6 percent at the open of European trading.

OPEC has pushed to cut production amid an expected decline in demand as the coronavirus epidemic threatens to wreak havoc on the world economy. The Kremlin has resisted extending cuts to the amount and length of time sought by the cartel.

Following the dispute with Russia, Saudi Arabia launched the start of a price war, cutting prices by $4 to $6 a barrel to Asia and $7 to the United States. The price of benchmark Brent crude was trading at $36 a barrel, while the traditionally lower-priced U.S. benchmark was at $32 a barrel.

In a 2014 price war, oil prices fell to below $30 a barrel.

As the Russian ruble crashed to a four-year low, the country’s central bank said it was halting foreign currency purchases for the next 30 days to “increase the predictability of actions of monetary authorities under the conditions of significant changes on global oil markets.”

The collapse in the oil price could push Russia’s budget into a deficit for the year, while the subsequent ruble drop may lead to higher inflation as foreign goods become more expensive in local currency.

With the ruble between 70 and 75 to the dollar, Russia’s budget would balance at an oil price of $40 to $45, according to Moscow-based Macro-Advisory.

Russia has been preparing its economy for an external shock like a drop in oil prices and has built up its foreign currency reserves to about $570 billion, giving it financial power to weather the sharp drop.

Jeffrey Halley, a market analyst at OANDA, told AFP that “Saudi Arabia seems intent on punishing Russia.”

“Oil prices…will likely be capped over the next few months as the coronavirus stalls economic growth, and Saudi Arabia opens the pumps and offers huge discounts on its crude grades.”

Masayuki Kichikawa of Sumitomo Mitusi Asset Management in Tokyo told Reuters: “I don’t think the end goal of the Saudis is to collapse the oil market. This is more likely a tactic to get Russia back to the negotiating table.

“I am sure that behind the scenes, the United States and Saudi Arabia are trying to get Russia to return to negotiate. The problem is we do not know how long this will last, so investors have no choice but to sell risk.”