Ruble and Crude in Near Perfect Synchronization

Russian ruble and brent crude

According to the EIA (Energy Information Administration), Russia is the largest producer of crude oil, including lease condensate, in the world. In the case of dry natural gas production, Russia is second only to the United States. Crude export is the biggest contributor in terms of revenue to the Russian budget. Europe and Asia together receive more than 95% of the crude that Russia exports. The fall in crude price has thus affected the Russian ruble the most. The ruble follows crude prices almost perfectly. The below graph plots the dollar to ruble pair against Brent crude prices from July 6 to August 28, 2015. The ruble has correlated almost perfectly with Brent prices at an astounding 0.98.

Ruble and Crude in Near Perfect Synchronization

Canadian dollar and WTI crude

While the ruble had a high correlation with brent crude, the Canadian dollar, a commodity currency, had a higher correlation of 0.85 over the same period with WTI crude. This was no surprise, as Canada earns much of its revenues from the export of energy-based products majorly to the United States. The graph depicts the US dollar to the Canadian dollar pair against WTI crude.

Ruble and Crude in Near Perfect Synchronization

Impact on the market

The VanEck Vectors Russia ETF (RSX) followed crude prices and fell by 5.23% from July 6 to August 28, 2015. The iShares MSCI Canada ETF (EWC) also fell by 8.37% over the same period.

The negative trend was also evident in the Russian ADRs (American depository receipts) over the same period, as Mobile TeleSystems (MBT) fell by 16.51%. The Canadian ADRs followed a similar trend with Canadian Natural Resources Limited (CNQ) and Baytex Energy (BTE) falling by 17.27% and 62.74%, respectively, over the same period.