The Brent quotes sank below $100/bbl, and Russia’s Urals went down to $98/bbl.
Photo: Pavel Soloviev
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The Market Fell the Prey to Oil
Russia’s market suffered yesterday the biggest slump of this century. Driven down by the oil price decline of below $100/bbl, RTS and MICEX fell by 7.5 percent to 9.1 percent, having lost over 40 percent since May. The panic flight of investors both for political and economic reasons, may cost another 10 percent to 20 percent to the market.
Lower demand for crude oil manifested by developed economies made the investors hastily withdraw from the raw assets. Another reason of the decline was the OPEC statement about the acceptable level of prices, while the spokesmen of Iran and Libya even pointed out to the excessive supply of oil to the markets and to the need to reduce production. The Brent quotes sank below $100/bbl, and Russia’s Urals went down to $98/bbl.
What’s more, Finance Minister Alexei Kudrin expressed yesterday the general unwillingness to ease tax burden on the oil industry. As a result, the RTS benchmark shed 7.51 percent Tuesday, rolling back to 1,395.11, while the MICEX index slumped 9.08 percent to 1,158.07. For both indicators, it is the greatest drop from June of 2006, when the speed with which nonresident investors were leaving the market was relatively the same.
Russia’s indices lost 41 percent to 44 percent from May, which was the time of their historic maximum. The market is going down despite quite healthy fundamental economic indicators, but no one appears particularly interested in them now.
The oil stocks were the obvious outsiders during the trading. Gazprom fell 7.8 percent, LUKOIL shed 9.1 percent and Rosneft lost 10.2 percent. First time in two years, Gazprom’s capitalization narrowed to below $200 billion, down to $191.75 billion (nearly 48 percent less than the maximum of $366 billion).
The banking sector suffered hefty losses as well. Sberbank and VTB shed 8.9 percent and 10.6 percent respectively. “The situation on the market looks like depression, no one willing to buy, only the panic-mongers are left, selling one and all at each good opportunity,” explained Andrei Kilin from Alfa Capital.
www.kommersant.com
All the Article in Russian as of Sep. 10, 2008
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