Column by Tatyana Edovina on the prospects for Russian foreign trade

According to the Central Bank, the Russian trade surplus in September increased from $10.6 billion to $15.3 billion – this was due to an increase in exports by $4 billion, to $40 billion, while imports continued to decline, but not so quickly. This dynamics confirmed expectations of an improvement in the balance of foreign trade, which should have supported the ruble. The trend, however, could prove fleeting if weak global demand puts pressure on commodity prices.

China’s trade statistics, for example, continue to indicate weak demand in developed markets, China’s own imports are growing, but this trend requires confirmation by at least November data. Oil supplies to the country, which jumped sharply in October, are still difficult to reconcile with indicators of business activity in its industrial sector (both according to the official version of PMI and according to Caixin, it is still falling).

Oil prices also continue to decline – a barrel of Brent costs less than $81 for the first time since June, despite the continued restrictions imposed by OPEC+ countries. Let us recall that in the third quarter, the rise in oil prices was primarily supported by the additional production reduction announced by Saudi Arabia by 1 million barrels per day (b/d) – by September, prices accelerated to $98 per barrel. On November 5, the country’s Ministry of Energy announced that they would adhere to the restrictions until the end of the year, keeping production at about 9 million bpd. The Russian side also announced its intention to keep production cuts at 300 thousand bpd until the end of the year. The next OPEC+ meeting is due to take place on November 26, but will probably not bring surprises, which means that market dynamics will be determined by supplies from countries that are not subject to restrictions (Iran may be the second largest oil supplier after the United States), and increasingly degree views on the prospects of the global economy.

For the ruble, such a price reduction may have a delayed effect – from October 16, large exporters from a closed list are required to credit their accounts in Russian banks with 80% of the currency received under export contracts in order to sell at least 90% of these amounts on the domestic market. The very strengthening of the ruble in the second half of October has probably already begun to put pressure on incoming payments in industries focused on foreign markets. According to monitoring of industry financial flows by the Bank of Russia, the indicator in October, adjusted for seasonal factors, decreased by 4.2% compared to the average level for the third quarter. For comparison: in July and August, the increase compared to the average for the second quarter was 34.1% and 40.7%, respectively. However, the balance sheet (and the ruble), however, may be supported by a further decrease in imports – the Central Bank records that in October interest rates and financial market yields continued to rise, while the growth of consumer lending began to slow down.