13.04.2020: Will oil hold above $30 on new OPEC+ deal? (Brent, USD/RUB)
Oil prices rallied on Monday but the optimism brought by the OPEC+ deal soon faded. Brent crude retreated to the negative territory while WTI gave back 7% gained in the morning trade.
The ruble is holding steady at 73.4 against the US dollar.
Oil producing countries have finally agreed to reduce output by 9.7 million barrels per day. Saudi Arabia, Kuwait, and the United Arab Emirates volunteered to make additional cuts of 2 million barrels. Besides, Canada, the US, and other non-OPEC countries have signalled a willingness to contribute. All these efforts will bring the global supply down by near 19 million barrels per day starting May 1. The number is quite impressive. However, it is still not enough to restore market balance.
Due to the measures taken to contain the coronavirus spread, oil demand has collapsed by 20 million barrels. Moreover, oil stockpiles are expected to keep increasing worldwide despite the new OPEC+ deal. Market participants were disappointed by the OPEC+ agreement as it failed to reach the reduction levels anticipated by the market. Still, the OPEC and allies have finally come to a compromise. The new deal on cuts is unlikely to send oil quotes rallying.
However, crude prices will now have a steady level of support. At the moment, the lifting of travel restrictions may help boost oil prices, but this is still hard to achieve. According to Russia’s energy minister, oil industry will remain in decline at least until the end of this year. Brent surged in the morning trade on Monday, but the bulls failed to maintain momentum.
As a result, Brent slipped to the red, having settled at 31 US dollars 30 cents per barrel in the mid-session. West Texas Intermediate is trying keep its early gains and is currently trading at 23 dollars 10 cents a barrel. All in all, global oil prices are holding steadily high today.
The dollar/ruble pair didn’t make any significant movements in the early session and settled at the level of 73.40. The ruble attempted to rise, but the US dollar is still staying strong. After gaining 7%, the ruble will most likely stop its uptrend amid the lack of drivers. Its further trajectory will depend on whether Brent oil manages to hold above 30 US dollars per barrel.
The Russian currency may also lose ground as risk appetite is gradually decreasing. In the mid-term, the ruble is seen to advance to the level of 70 against the US dollar. Today, the ruble may face a correctional decline and reach the 74.40 mark.
Markets await the World Economic Outlook for 2020 from the International Monetary Fund. Its forecast may deteriorate the global market sentiment.
In addition, the data on China’s GDP for the first quarter should be released shortly.
This week, the auction on the federal loan bonds may turn out to be more successful as the uncertainty around the OPEC+ deal faded.