Bloomberg News

Oil Link Fades as Gazprom Sinks on Output Call: Russia Overnight

October 09, 2012

Russian equities (RUS14BN:US) in New York are breaking their correlation with oil as concern the global economic outlook is worsening outweighs the benefits of a jump in crude prices.

The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies in the U.S. slipped 1 percent to 98.16 yesterday, pushing its 65-day correlation coefficient with New York crude to 60, the lowest since May 29, data compiled by Bloomberg show. OAO Gazprom dropped after the world’s biggest gas exporter said output will fall more than forecast this year as European demand slows. Futures expiring in December on Moscow’s RTS Index declined 0.6 percent to 147,840 in New York.

The Russia-US index followed the Micex (INDEXCF) and RTS indexes in Moscow lower as the International Monetary Fund predicted the slowest global economic growth since 2009 for this year and said there are “alarmingly high” risks of a deeper contraction. Crude producers OAO Gazprom (OGZPY:US) Neft and OAO Surgutneftegas (SGTPY:US) slumped, even as Turkey sending more tanks and missile defense systems to the Syrian border spurred oil, Russia’s biggest export earner, to its first gain in three days.

“Worries about slowing growth, which may result in lower commodity and oil prices, is the driving force in the market,” Igor Nuzhdin, an analyst at OAO Nomos Bank in Moscow, said by phone yesterday. “That lack of clarity outweighs current oil price moves and drives equities lower.”

The Market Vectors Russia ETF (RSX:US), the biggest U.S.-traded exchange-traded fund that holds Russian shares, slid 1 percent to $28.95 yesterday. The RTS Volatility Index was little changed at 28.93.

Gazprom Output

Russia’s biggest company lost 1.7 percent to $10 in New York, the lowest level since Sept. 6. The American depositary receipts settled at a 0.9 percent discount versus the company’s Moscow-listed stock, the widest gap in a week. Gazprom fell 1.1 percent to 157.25 rubles, or $5.05. One ADR is equal to two ordinary shares.

The decline in export volumes may exceed the anticipated 2 percent, Vsevolod Cherepanov, the head of Gazprom’s production division, said in London yesterday. The Moscow-based company will review its target to pump 528 billion cubic meters and may also revise its 2013 goal, he said.

Gross domestic product in Russia, the world’s largest energy exporter, will grow 3.5 percent this year, below the 3.9 percent outlook in June, the IMF said in a report released in Washington yesterday. The world economy will grow 3.3 percent this year and 3.6 percent next year, the lender said.

‘Vulnerable to Global Trends’

American depositary receipts of Surgutneftegas, Russia’s fourth-largest oil producer fell 0.9 percent to $6.66, settling at a 0.6 percent discount versus the company’s Moscow-trade shares, the widest gap in four days. In Moscow, the stock retreated 0.2 percent to 20.88 rubles, or 67 U.S. cents. One ADR equals 10 preferred shares.

Gazprom Neft, the oil arm of Russia’s gas export monopoly, fell 0.8 percent to $25.01, the biggest loss in a week. Shares of Gazprom Neft slipped 0.4 percent to 154.49 rubles, or $4.96 yesterday. One ADR is equal to five ordinary shares.

“Investors treat Russian equities as something of a derivative trade in global markets rather than a strong independent asset class,” Chris Weafer, chief strategist at Sberbank-CIB, formerly known as Troika Dialog, said by e-mail from Moscow yesterday.

Gazprom Neft Slips

Oil advanced for the first time in three days as increasing tension in the Middle East countered concern that a global economic slowdown will curb demand. Radar-assisted Turkish guns fired on Syrian artillery units and tanks for six consecutive days after the deaths of five people struck by a Syrian shell in Turkey on Oct. 3.

Crude oil for November delivery jumped 3.4 percent to $92.39 a barrel on the New York Mercantile Exchange yesterday, the highest settlement since Oct. 1. Prices are down 6.5 percent this year.

Brent oil for November settlement gained 2.4 percent to $114.50 a barrel on the London-based ICE Futures Europe exchange. The price has risen as 14 North Sea Forties crude cargoes for October were delayed. Forties, the cheapest of the four grades that make up the Dated Brent benchmark, typically sets the marker used to price more than half of the world’s oil.

Urals Advances

Urals crude, Russia’s chief export blend, gained 1.7 percent to $112.30 a barrel yesterday, the lowest level since Sept. 14. Brent underpins prices for the Urals blend.

Yandex NV (YNDX:US), Russia’s biggest Internet company and the owner of Russia’s most-used search engine, sank 2.4 percent to $23.55 yesterday, the lowest since Sept. 27. Google Inc. (GOOG:US), the world’s largest Web search provider, fell 1.8 percent to $744.09.

United Co. Rusal, the world’s largest aluminum producer, lost 0.9 percent to HK$4.40 at 10:54 a.m. in Hong Kong trading. The MSCI Asia Pacific Index fell 0.8 percent.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • RUS14BN
    (Bloomberg Russia-US Equity Index)
    • $73.51 USD
    • 0.29
    • 0.39%
  • OGZPY
    (Gazprom OAO)
    • $6.53 USD
    • 0.10
    • 1.57%
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