Russia’s Oil and Gas Revenues Set to Halve in December, Hitting Lowest Level Since August 2020

Source: Bloomberg

Russian state oil and gas revenue in December is likely to almost halve from a year earlier to 410 billion roubles ($5.17 billion) as a result of lower crude prices and a stronger rouble, Reuters calculations showed on Friday.

Oil and gas revenue is the leading source of cash for the Kremlin, making up a quarter of federal budget proceeds that have been drained by heavy defence and security spending since Russia began its military campaign in Ukraine in February 2022.

For the entire year, the revenue is set to fall by almost a quarter to 8.44 trillion roubles, below the Finance Ministry's 8.65 trillion rouble forecast, according to calculations based on data from industry sources and official statistics on production, refining and supplies.

Russia reported its lowest monthly oil and gas revenue of 405 billion roubles in August 2020, when oil prices tumbled during the COVID-19 pandemic.

Sergei Konygin, a senior analyst at Moscow-based investment bank Sinara, said that the budget deficit of 1.6 trillion roubles expected in December will be covered by state bonds, but 2026 will be more difficult.

"Next year is a big challenge to the budget as it was formed under an optimistic scenario of oil at $59 (per barrel) and the rouble at 92 (per dollar)," he said.

The Russian oil price used for taxation purposes decreased in November by 16.4% from October to $44.87 a barrel while the rouble strengthened to 80.35 per dollar.

Konygin expects amendments to the budget next spring to make use of the National Wealth Fund to address the deficit under a lower assumed price of oil.

Ukraine and its Western backers have repeatedly said they want to curb Russian oil revenue to force the world's second-largest oil exporter to end the war in Ukraine.

The Finance Ministry had initially expected 10.94 trillion roubles in oil and gas revenue this year but made a downward revision in October to account for global oil prices that have been driven lower by concern over a supply glut.

The Finance Ministry will publish its oil and gas revenue estimates for December on January 14.

Source: Reuters

Source: cnbc

Source: reuters

Chicago Federal Reserve President Austan Goolsbee on Friday explained why he voted against this week's interest rate cut, saying policymakers should have waited until they had more information before easing further.

"I'm pretty optimistic that for 2026 rates will will be able to be a fair bit lower than they are today," the central banker said during a CNBC interview. "But I've just been uncomfortable front loading too many rate cuts and assuming that what we've seen in inflation will be transitory."

Goolsbee was one of three Federal Open Market Committee members to vote against the quarter percentage point reduction, the third consecutive easing measure. He was joined by Kansas City Fed President Jeffrey Schmid, as well as Governor Stephen Miran, who preferred a steeper cut.

While he has said in the past he sees room for rates to come down further, Goolsbee said a lack of progress on inflation argued against moving now.

"While I voted to lower rates at the September and October meetings, I believe we should have waited to get more data, especially about inflation, before lowering rates further," the policymaker said in a post on the Chicago Fed's website.

"Given that inflation has been above our target for four and a half years, further progress on it has been stalled for several months, and almost all the businesspeople and consumers we have spoken to in the district lately identify prices as a main concern, I felt the more prudent course would have been to wait for more information." he wrote.

Goolsbee will not be a voter on the FOMC in 2026 but will still participate in meetings.

In the CNBC interview, he elaborated on his misgivings about cutting.

While other Fed officials have expressed concern about the weakening labor market, Goolsbee said data has shown conditions to be "pretty stable."

"I'm pretty optimistic that for 2026 rates will will be able to be a fair bit lower than they are today. But I've just been uncomfortable front loading too many rate cuts," he said in the interview. "We don't take a lot of extra risk, in my view, to just wait to Q1 2026, and make sure that we're back on path at 2% inflation."

The FOMC on Wednesday voted to lower its benchmark rate to a range between 3.5%-3.75%.

In his post-meeting news conference, Chair Jerome Powell expressed worry that the labor market looks weaker than the headline numbers suggest, saying he expects official nonfarm payroll counts to be lowered and show losses in recent months.

For his part, Goolsbee said he is "one of the most optimistic people" that rates will be lower in the year ahead.

Schmid also released a statement Friday explaining his dissent. He also voted against a rate cut in October.

"Inflation remains too high, the economy shows continued momentum, and the labor market—though cooling—remains largely in balance," Schmid said. "I view the current stance of monetary policy as being only modestly, if at all, restrictive. With this assessment, my preference was to leave the target range for the policy rate unchanged at this week's meeting."

Earlier Friday morning, Philadelphia Fed President Anna Paulson, who will vote in 2026, said she views policy as "somewhat restrictive" and is more worried about unemployment than inflation.

Source: CNBC

Even if overall inflation slows next year as the U.S. Federal Reserve anticipates, President Donald Trump will still face political headwinds over the cost of living with home mortgage rates expected to remain comparatively high, tariff-related price increases on goods seen persisting through the first part of the year, and cost pressures building around items like beef and electricity that can have an outsized influence on consumer perceptions.

Fed economic projections issued on Wednesday held good news for the administration, with policymakers expecting inflation to cool over the coming year, while economic growth accelerates.

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Across the broad array of services that account for most economic activity, "disinflation appears to be continuing," Fed Chair Jerome Powell said, while goods inflation should "come down in the back half" of 2026 as firms finish dividing tariff costs among consumers, their suppliers and their own operating margins.

But in a midterm election year Trump and Republicans face a problem all politicians share. Consumers - voters - focus far less on the macroeconomic generalities analyzed by economists, for whom inflation is a carefully weighted average rate of price changes across all goods and services, and more on what their local grocery charges for milk, how much the utility bill has risen, and what insurers charge to renew their homeowners policy.

Trump, whose administration has become concerned about low poll numbers particularly on the economy, with affordability a central issue, can rightfully note that overall inflation has been pretty modest on his watch so far. The Consumer Price Index from his inauguration through September is up about 1.6%, equivalent to a roughly 2.4% annual pace and not far off of the central bank's 2% target, though that is measured slightly differently. Food at home, the rough equivalent of grocery prices, is up even less at 1.4%.

But prices haven't fallen as Trump promised during his election campaign and early on in his administration, with consumers still struggling through what has now become a nearly five-year case of rolling sticker shock.Some prominent CPI line items have in fact spiked sharply in recent months, a fact that may turn hamburger into the same sort of political cudgel for Democrats that egg prices were for Trump last year.

In September, ground beef was 14% more expensive than when Trump resumed office; electricity prices were up over 4%, or around 6% on an annualized basis, and expected by many forecasters to go higher; and homeowners insurance was rising at a roughly 10% annual pace.

There were also cautionary notes in Powell's commentary to indicate the affordability fight will persist.

Powell singled out the housing market as one part of the economy that continues to struggle, with likely little respite coming from the Fed's recent rate cuts. While its benchmark interest rate does influence long-term mortgage rates, government debt and other securities, Powell said the housing problem is one of chronic undersupply.Mortgage rates have moderated since nearing 8% a little over two years ago, but they've remained around 6.2% since September, after investors began pricing in what became quarter-point Fed rate cuts in September, October and December. With the Fed on hold for now and other factors holding up longer-term interest rates, they may not move much further.

Real estate firm Redfin this week reported both sellers and buyers pulling back, with sales prices rising nonetheless and mortgage rates likely to "remain largely unchanged in the near term."

Mortgage rates remain far above the ultra-low rates seen in the roughly 15 years following the 2007-to-2009 financial crisis, when Fed policy aimed specifically at holding down long-term borrowing costs.

Absent a serious recession or financial swoon, sub-3% mortgages are unlikely to reappear. The collapse of the housing industry during that crisis still echoes through what Powell said was years of underbuilding.

"We just haven't built enough housing for a long time...We can raise and lower interest rates, but we don't really have the tools to address a secular housing shortage," he said.

Home affordability remains a key issue for younger workers and families who've delayed homebuying and the increase in household wealth that typically accompanies it.

The Census Bureau's latest homebuilding data is from August, with reports still delayed by the government shutdown, but at that point new building permits were down 11% from the year before while new housing starts were off 6% from a year earlier.

Construction jobs, which hit a new high in mid-2022 during the rebound from the COVID-19 pandemic and kept growing until this year, have mostly flatlined at around 8.3 million since January.

There's been a general stall, in fact, in the blue-collar jobs Trump said he would revive. The manufacturing sector lost about 50,000 jobs from January through September; the much smaller mining and logging sector shed about 15,000.

To the upside: Workers' average hourly earnings have been growing faster than inflation, and some important costs, like rent, are now increasing at rates more in line with pre-pandemic norms.

But that hasn't made the public happy.

After tending to stay steady or even fall during the years of increasing globalization, goods prices in general are now rising following the imposition of tariffs, and even if that does not persist much longer it has meant higher costs for consumers during the holiday shopping season.

Opinion surveys have responded.

Source: Kitco