06.05.2020: RUB fails to hold gains despite rising oil prices (Brent, USD/RUB)
Oil price were edging lower in the morning trade. A higher than expected rise in US oil inventories forced traders to refocus on the lack of crude storage capacities. The ruble is currently trading in the negative territory.
According to the American Petroleum Institute, crude inventories in the US rose by 8.4 million barrels last week. Today traders will be looking for the official data from the Energy Information Administration. If oil inventory build exceeds 9-10 million barrels, oil bears will get the advantage over the bulls.
In general, oil market shows some signs of recovery as oil continues the bullish rally. For instance, Brent closed the session on Tuesday with 12% gains, having settled above 31 US dollars per barrel.
Oil prices have moved up recently as some European and Asian countries have started to ease the lockdowns. Besides, the production cuts under the new OPEC+ agreement provides additional support to oil buyers. However, the complete recovery of energy market will take some time, so the oil quotes will remain highly volatile.
On Wednesday, global oil prices opened the trade with a correctional pullback.
However, the bulls managed to maintain their position. In the mid-trade, both benchmarks returned to the positive territory. Brent oil futures were trading at 31 US dollars 77 cents per barrel while WTI crude advanced to 25 US dollars 26 cents per barrel.
Despite the positive dynamics, many investors stay cautious when it comes to contracts which are soon to expire. Oil futures for June will expire on May 20, so the market volatility is likely to increase closer to this date. Today, the ruble started to trade with gains but later plunged to the red. The increased demand for foreign currency among exporting companies has put a downward pressure on the ruble.
Besides, the Bank of Russia may cut its currency interventions since the price of Urals oil has increased. The dollar/ruble pair was gaining 0.82% in the first half of the day for the greenback to settle at the level of 74 rubles 35 kopecks. Major currencies on Forex are trading mixed today.
US index futures grew slightly in the morning session. In general, the current situation for the ruble is rather favourable.
The dollar/ruble pair is expected to trade in the range of 73.50 and 74.50. The pair has its key resistance at the level of 78.
If the price breaks through this level, the next target for the bulls will be the mark of 80. At the moment, it seems that the ruble is reacting more strongly to stock indices than to oil prices. So it is worth focusing on them.
In addition, the situation with the coronavirus and rising tensions between US and China may weigh on the Russian currency.