(Bloomberg) --
Russia's ruble pared its rally as traders speculated a boost from spiking oil prices may prove fleeting.
The currency was still heading for its biggest jump since July after a strike on a Saudi Arabian refinery drove oil up the most on record. Bonds were little changed, while the shares of Rosneft PJSC, Russia's biggest oil company, had their strongest advance since February as Citigroup said the company's production flexibility means it's “best-positioned” to benefit from the Saudi outage.
The ruble bucked emerging-market currency declines, joining gains for other commodity-linked nations as the attack on the world's largest crude exporter sent Brent crude soaring 11%. ING Groep NV predicted oil prices will only keep gains if Saudi Arabia fails to resume output in the coming weeks, while support for the ruble would be limited by the government's purchases of excess oil revenue.
“This is a short-term positive for the ruble,” said Dmitry Dolgin, an economist at ING in Moscow.
Russia's currency is getting a knee-jerk lift because every extra $1 on the oil price translates into an additional $7.5 million of export revenue each day, according to Chris Weafer, a senior partner at Macro Advisory Ltd. in Moscow. About 75% of that windfall goes into the budget, he said.
How long the support lasts “will depend on the Saudis,” Weafer said. “History suggests the boost will be short-lived.”
Read More: Speed of Saudi Oil Recovery In Focus After Record Supply Loss
Market takeways:
- Ruble pares gains to 0.5% at 64.0450 per dollar, as of 12:15 p.m. in Moscow; the ruble has climbed three days in a row and last week recaptured its position as the best-performing EM currency this year
- The MOEX stock index snaps two days of losses, adding 1%; Rosneft, Surgutneftegas, Lukoil among biggest gainers
- Rosneft trading volumes are 289% their daily 3-month average
While some of the supply may be returned in days, the strikes on the Abqaiq facilities have highlighted the vulnerability of the world's most important exporter and added more political risk to crude prices. Russian Energy Minister Alexander Novak said he planned to speak with Saudi Energy Minister Abdulaziz bin Salman on Monday.
“Our short-term tactical model highlights that there is more upside, if oil holds at current levels,” VTB Capital strategists including Maxim Korovin, wrote. “The Middle East geopolitical premium is back on the table.”
To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net
To contact the editors responsible for this story: Alex Nicholson at anicholson6@bloomberg.net, Natasha Doff
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