Oil prices fell to a five-year low on Monday, sending the rouble tumbling, while fears over slowing manufacturing activity in Europe and China undermined global confidence.
The Russian currency slid more than 6% against the dollar to a new record low.
It was the rouble’s biggest one-day fall since Russia’s 1998 currency crisis.
Brent crude sunk as low as $67.53 a barrel, the cheapest it has been since October 2009.
It later regained some ground to trade at $69.65 a barrel. US crude fell 50 cents to $65.65 a barrel, having hit an intraday low of $63.72 – the lowest since July 2009.
Oil prices have fallen by about a quarter since the summer, while the rouble is down some 40% since January.
The latest falls in the oil price follows Opec’s decision last week not to cut output and leave its production target at 30 million barrels a day.
Amrita Sen, Energy Aspects’ chief oil analyst, said: “The market is still very much in panic mode. Once we get over the panic, Brent prices will probably stabilise at around $65 to $80 a barrel in the short term.”
Russian investment bank Sberbank said in a note: “In the short term, the Russian market is a victim of Opec’s apparent decision to reduce the volume of high-cost production through lower prices. The market and the rouble will not stabilise until oil does.”
Ksenia Yudayeva, deputy chairman of the Russian central bank, tried to reassure traders by saying there was sufficient liquidity in currency markets and that the bank had prepared new economic forecasts based on a price of $60 a barrel.
The rouble was trading at 52.45 against the dollar and was 3.8% lower at 65.39 against the euro.
Malaysia’s oil-dependent ringgit also suffered heavy losses, while the yen hit a seven-year low against the dollar and Nigeria’s naira was down 2% to a new record low against the greenback.
China slows
The slide in oil prices was compounded by China’s factory activity slowing by more than expected in November, with the official purchasing managers’ index (PMI) dipping to 50.3 in November from October’s 50.8, closer to the 50 point mark that separates growth from contraction.
The fears of declining demand from China also sent copper prices to their lowest level in four-and-a-half years in London and hit shares in mining companies.
Neil Williams, chief economist at fund manager Hermes in London, said: “Over-optimistic global growth forecasts have been pared back, and probably rightly so, and also China has come back on to the radar. And that of course has become a big driver for a lot of commodity prices.”
Adding to the gloom were figures showing that eurozone manufacturing growth stalled in November as new orders fell at the fastest pace in 19 months, despite heavy price cutting.
The final PMI reading for the manufacturing sector in November came in at 50.1, the lowest number since June 2013.
Chris Williamson, chief economist at survey compiler Markit, said: “The situation in euro area manufacturing is worse than previously thought… there is a risk that renewed rot is spreading across the region from the core.”
Meanwhile, Moody’s downgraded its credit rating for Japan on Monday, citing “rising uncertainty” over the country’s debt situation and prime minister Shinzo Abe’s faltering efforts to boost growth, with an election a fortnight away.
The ratings agency cut Japan’s rating by one notch to A1 from Aa3, after the economy sank into recession during the third quarter.
BBC
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