Oil-Related Stocks, Currencies Get a Fresh Pummeling

Currencies and stocks correlated with the price of oil were subjected to a fresh pummeling Tuesday, as the price of the commodity slipped to another five-and-a-half-year low on global oversupply concerns.

In Russia, where oil and gas exports account for about half of federal budget revenues, the ruble was down 4.6% by midday against the U.S. dollar, while the Norwegian krone declined around 1.2% against the euro.

Further afield, Nigeria's naira lost 0.5%. Oil and natural gas make up almost all of Nigeria's exports and 80% of government revenue, according to the International Monetary Fund. In addition, the Canadian dollar, also a petrocurrency, fell around 0.2% against the buck, as Brent crude for February delivery on London's ICE Futures Exchange dropped more than 2% to under $52 a barrel--its lowest level since April 2009.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February flirted with $49 a barrel, down about a dollar from Monday's settlement.

Driving the bearish mood were reports that Russian oil output hit post-Soviet records and Iraqi oil exports were at their highest since the 1980s.

In addition, away from the supply side story, "the steepness of the decline in the price of crude oil is prompting heightened investor concerns that global demand may be weaker than expected," Lee Hardman, a currency economist at Bank of Tokyo-Mitsubishi UFJ said.

In stock markets, the U.K.'s FTSE 100, with a high proportion of oil and gas companies, has underperformed the wider European market, dropping 0.4% by midday, while Moscow's dollar-denominated RTS stock index fell more than 4%. Oslo's OBX also declined almost 0.5%.

The cost of insuring five-year Russian debt against default correspondingly surged to a near six-year high.

It now costs investors around $642,000 a year to protect a notional $10 million of Russian debt for five years. On Monday evening, it cost just $550,000.

Piotr Matys, rates strategist at Rabobank, said the increase in the cost of insuring the debt reflects growing concerns that Russia's credit rating may be downgraded.

Last month, Standard & Poor's warned that it may considering cutting Russia's credit rating to below investment grade as soon as in January.

"After all, reserves [have] plummeted precipitously and the economy is now widely anticipated to contract in 2015 following the sharp fall in oil prices and the emergency interest rate hike announced in December," Mr. Matys said.

Debt issued by Russian companies such as Gazprom OAO and Lukoil OAO cheapened, too, while sovereign bonds issued by neighboring Kazakhstan were also suffering, credit strategists said.

The Bank of Russia said Tuesday it had spent an additional $11.9 billion in December in an attempt to stem the ruble's decline, making the total sale of forex during the past year the equivalent of around $82.5 billion. However, neither this intervention nor the government's pressure on exporters to sell their foreign exchange revenues has been able to reverse the decline.

Russia's stock market index has nearly halved since the start of 2014, and so has the value of the ruble against the dollar. One dollar bought 32.03 rubles a year ago, compared with 63.65 Tuesday.

--Chiara Albanese and Georgi Kantchev contributed to this article.

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