InvestmentsDec 17 2014

Oil continues to decline and weighs on Russia

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The price of oil has almost reached half the level it traded at just six months ago after dropping below $60 per barrel.

Brent crude oil, which is the international oil benchmark, dropped to $59.6 per barrel at the close of trading yesterday - virtually half the $115 level it reached in June.

In early trading this morning, Brent has fallen to $59.3.

The decline in the commodity’s price will be good for some - such as the US consumer who will see prices at the gas pump falling - but it has piled pressure on Russia.

The country saw its currency continue to slide dramatically against the dollar yesterday in spite of an exceptional 6.5 percentage point rise in its interest rate to 17 per cent.

Large movements in the rouble saw it move between 58.27 and 80 to the dollar and then back to 70 but is now back in the mid-60s.

Reports in the Financial Times suggest the ministry of finance in Russia will start selling dollars on the market today.

“The ministry of finance considers the rouble to be extremely undervalued and is starting to sell its remaining foreign currency on the market,” it said in a statement carried by Russian newswires.

Oil and gas account for roughly three-quarters of Russia’s exports and more than half the government’s budget revenue, according to the FT.