Some in America must be wishing their leaders would shut the stocks markets, while they put together a rescue package for Wall Street.
While the Russian stock market has been silent, the country’s finance ministry have pledged to slash oil taxes by 25 per cent by changing the way the duties are calculated, and the country’s president has said the government will spend $19.59bn to support and stabilise its financial markets.
Rosneft in London has climbed 18 per cent on the news and the news may provide a fillip to other Russian oil stocks.
This from Unicredit Aton in Moscow:
The change is due to the ministry adjusting its methodology: instead of using oil prices over the previous two months, as is the usual practice, it based its calculations on the oil price over September 1-17, effectively annulling the “Kudrin’s scissors” effect. This resulted in a lower base price of $97/bbl. Product duties should accordingly decrease to $263/ton for light products and $142/ton for heavy products, vs. the previously planned figures of $340/ton and $183/ton respectively.
We estimate the cut may save the oil sector $5.5bn-$6.5bn, depending on export volumes; it may also improve the operating cash flow of companies that would otherwise have suffered from higher taxation amid dropping crude prices.
We see the news as very positive: by changing its methodology in response to declining crude prices and the ongoing market turmoil the government has shown itself ready to loosen its firm fiscal grip on the sector in a time of need. At the current Brent price of $95/bbl the move should increase companies’ export netbacks by 61% on average, from $27/bbl to $44/bbl.
Both the oil price and overall market conditions are volatile; however, we remain bullish on the sector’s long-term outlook. If the president approves a further tax break in 2010, we believe an attractive entry point may have been reached. Rosneft, Lukoil, and Gazprom are our top picks among the blue chips, and are up strongly on GDR markets today.