Oil companies rose steeply in May
Carnegie Rysslandsfond fell 1 percent in May. The decrease is mainly due to the appreciation of the Swedish krona, which is up 5 percent since the end of April and has now recovered the entire year’s fall against the dollar.
Russia has acted vigorously to meet the new OPEC+ targets, and agreed to cut crude production to 8.5 million barrels per day. Its average output is already down to 8.8 million barrels, and this has helped to rapidly increase prices. There is also an influence from greater demand as economies open up. It is estimated that oil consumption bottomed out at around 75 million barrels per day and will be over 85 million in June.
Lower volumes and prices naturally have a big impact on Russian oil companies. Gazpromneft, for example, showed a loss for the first quarter, and the second quarter will be even worse. However, the market is ignoring upcoming results, and oil companies rose sharply in May.
Confirmed Covid-19 cases in Russia have now reached 424,000. Only the US and Brazil have more. Despite this, the authorities believe the peak has passed and have started easing restrictions. Moscow authorities, for example, allowed stores to be opened from June 1.
The Russian statistics authority recently released economic data for April, suggesting that the economy has not been as severely affected as expected. If the April numbers are anything to go by, the figures for the entire second quarter appear to suggest a GDP decline of 7-8 percent.
The dissonance between the strength of the markets and the weak global economy remains very large. The optimism of the markets comes primarily from the fact that many countries are now easing restrictions and trying to end their lockdowns.
However, it is worth remembering that the road back to some kind of normality will be difficult and may take time. Unemployment will remain high and it could be tough for consumers to regain their confidence.