Rouble falls as oil price hits five-year low

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 as much as 6% against the dollar to a new record low.

The rouble was on track for its 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 just above $70 a barrel, while US crude was at $66.34 a barrel, having hit an intraday low of $63.72 - the lowest since July 2009.

Oil prices have fallen by more than

a third 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.

Saudi Arabia, the cartel's biggest producer, said on Monday said it was content with the decision to maintain output despite a supply glut and plunging prices.

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."

Eugen Weinberg, a Commerzbank analyst, said: "The market is still looking for a new equilibrium below $70 [a barrel], which is a little surprising given that with the current prices much of the shale oil production in the US, or part of it, will be unprofitable."

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 gained some ground in afternoon trading on Monday, to be down 3.8% at 52.41 against the US dollar and 3.5% lower at 65.39 versus the euro.

Traders said the relatively sudden rally pointed to intervention by the central bank, which declined to comment.

New sources of oil, such as oil sands in Canada and shale oil in the US, have helped increase global supply and reduce prices

The central bank has not intervened in the foreign exchange market since 10 November, saying it would do so only if it considered the rouble's fall a threat to financial stability.

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.

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 Business