Russia in the spotlight Q2 2016

- The oil market: China focus
- The Russian economy: a mild spring
- Inflation: the outlook improves

The oil market: China focus

China imported 1mbpd more oil in H1 2016 compared to H1 2015. While significant question marks remain in China’s oil story, most of them appear to offer more room for the increase in oil imports as China shows creativity in making use of the current low oil prices to switch to cheaper imported oil, fill up its reserves and establish a strong position in the oil product export markets.  Overall, the case for the continued strength of China's oil demand looks rather convincing despite the headwinds.

The Russian economy: a mild spring 

The spring was mild for the Russian economy, with a gentle improvement on almost all fronts compared to the winter months. At the same time there was no interim positive trend and most indicators were flat in the last two months. There was, however, a little bounce in the retail sales figures in April, afforded by positive real wage growth in the preceding months and the confidence boost provided by the oil prices, which rose nearly 20% in April compared to 6-8% in March and May.

Inflation: the outlook improves

Inflation settled at the level of 7.3-7.5% in Q2 exactly as we expected, as there were no FX shocks to throw it off course. The outlook of the Central Bank of Russia (CBR) was consistent from month to month, which has prevented the regulator from making any rate cuts until June, when outlook finally improved. With this, there should be some progress with inflation in the summer months.