Oil prices tumble

Oil Tumbles Under $43, Approaches Goldman's "Last Ditch" Support Level

Zero Hedge,

11 August, 2015

WTI Crude just broke to a $42 handle - which would be the lowest closing price on a continuous adjusted future contract since March 2009.

Based on the front-month contract, Goldman Sachs warns that there is "last ditch" support between $43.24 and $42.44 - a break below there could lead to serious capitulation...

Ruble extends losses as crude dips to 6-yr low

RT,

11 August, 2015

© Maksim Bogodvid / RIA Novosti

The Russian ruble continued its decline Tuesday, falling almost 3 percent to 64.38 against the US dollar and to 71.10 against the euro on the Moscow stock exchange. The drop came as falling oil prices hit new lows.

West Texas Intermediate (WTI) dropped by 4 percent to $43.06 a barrel, tumbling back toward a six-year low.

Brent futures fell $1.63 to $48.78 a barrel, close to their January low.

Oil fell on concerns of weaker demand from China after the world’s top energy consumer devalued its currency by the most in the two decades, and after OPEC released its monthly output figure, now at a three-year high.

China’s central bank has cut its daily reference rate by almost 2 percent, marking the biggest downward adjustment since 1994. Beijing said July exports dropped 8.3 percent, compared with a year before. A weaker yuan enables Chinese exporters to increase revenue from foreign sales.

On Tuesday, OPEC reported that output for July stood at a 3-year high due to Iran’s crude return to the market. The return of Iranian oil to the market could make oil even cheaper than the current lows of about $49.50 a barrel, the cartel reported.

The Russian ruble was the world’s best-performing currency at the beginning of this year, but has weakened by more than 20 percent against the dollar since May. Economists say the Russian currency won’t strengthen in the near future, and predict it will fall past 65 to the dollar in the next few days.

China stages biggest currency devaluation in 20 yrs to revive exports

RT,

11 August, 2015

The central bank of China has cut its daily reference rate by 1.9 percent, making its biggest downward adjustment since 1994. The People’s Bank insists Tuesday’s measures are a one-off aimed at reviving faltering exports.

The bank’s announcement prompted the yuan exchange rate to tumble against the US dollar. As of 8:15am GMT on Tuesday, the yuan (renminbi) was trading at 6.33 to the dollar, 1.9 percent lower than Monday. 

#China devalues the yuan by most in two decadeshttp://t.co/7dr41vqyCO@businesspic.twitter.com/frZ3JfgCSf

— Richard Bravo (@richbravo2) August 11, 2015

Over the weekend, Beijing said July exports dropped 8.3 percent, compared to a year before. The weaker the yuan, the bigger revenues exporters get from their foreign sales.

The tough move may also indicate that Beijing is allowing the market more freedom to determine the yuan rate.

“The People’s Bank of China has astutely combined a move to weaken the yuan with a shift to a more market-determined exchange rate,” Eswar Prasad, a Cornell University professor and former China representative of the IMF told the Wall Street Journal.

Becky Liu, a Hong Kong-based senior strategist for Standard Chartered, said the bank’s move was “big… and bolder” than predicted.

“The new fixing will be quoted based on the previous day’s closing, which is a real market level. The band will become the real band. This is a big step, and bolder than we expected,” she told Bloomberg News.

Tuesday’s devaluation comes a decade after Beijing’s key decision to replace the hard peg against the US dollar by a link to a basket of currencies. The exchange rate was simultaneously set within a band of around 8.11 to the US dollar, marking a 2.1 percent move from an 8.28 yuan exchange rate in place before 2005. In those 10 years, the yuan has risen 33 percent, becoming one of the world’s most-traded currencies, while Beijing has staked out its position as the world’s second-biggest economy.

The adjustment could complicate Beijing’s goal of making the yuan the world’s leading currency. On the other hand, becoming more market-oriented is a solid step towards greater openness.

Russia in recession on back of cheap oil, sanctions

Russia’s economy suffered a 4.6-percent fall in GDP in the second quarter of 2015 against the same period last year, the worst performance in six years, according to official statistics. A collapse in oil prices and Western sanctions were largely to blame, however improvement is forecast in 3Q of 2015.

The sharp GDP quarterly decline more than doubled the 2.2 percent year-on-year contraction recorded in the previous three months, Russia's Federal Statistics Service said Monday. The government had previously predicted a Q2 decline of 4.4 percent.