December 6, 2018 / 11:46 AM / 6 months ago

UPDATE 1-Falling oil rattles Russian rouble after OPEC cut signal

(Adds background, updates prices)

MOSCOW, Dec 6 (Reuters) - Russia’s rouble extended losses on Thursday, following oil prices which fell after OPEC signalled it may agree a smaller output cut than expected.

The market had widely expected the Organisation of the Petroleum Exporting Countries to agree a joint cut of between 1 and 1.4 million barrels per day.

But Saudi energy minister Khalid Al-Falih said on Thursday a one million barrel per day cut would be enough, sending crude prices falling. OPEC is waiting to hear how much oil output Russia will cut before making its own decision.

The rouble dropped to its weakest level since Nov. 28 of 67.23 versus the dollar as Brent crude oil , a global benchmark for Russia’s main export, briefly fell to $58.36 per barrel.

“Today the market decided to follow oil prices,” said Konstantin Kostrub, head of treasury at ING Eurasia bank in Moscow.

The rouble is now facing risks of a further drop in oil prices as well as the looming resumption of the central bank’s daily currency purchases from next year, Kostrub said.

The rouble recovered some ground and was down 0.6 percent on the day at 66.96 versus the dollar as of 1129 GMT.

Against the euro, the rouble was 0.5 percent weaker at 75.90 versus the euro.

The room for the rouble’s weakness, however, could be limited by higher interest rates at home that, in theory, increase the investment appeal of Russian assets.

Chances that the central bank will raise rates at its board meeting next week have increased after data showed on Wednesday that weekly inflation had recently picked up to 0.2 percent from 0.1 percent, Alfa Bank analysts said in a note.

A Reuters poll conducted in late November forecast that the central bank would need to raise rates in the next few months to tame rising inflation, given its plan to resume regular purchases of foreign currency on the local market from January.

Russian stocks also took a hit from falling oil. The dollar-denominated RTS index was down 2.04 percent to 1,129.57 points. The rouble-based MOEX Russian index declined 1.82 percent to 2,401.73 points.

For Russian equities guide see

For Russian treasury bonds see (Reporting by Andrey Ostroukh, Vladimir Abramov and Polina Nikolskaya, editing by Alexander Smith)

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