26.02.2020: Falling oil prices put RUB under pressure (Brent, USD/RUB)
Oil opened today’s session trading mixed but later edged lower following the overall negative market sentiment. Traders expect the Organization of the Petroleum Exporting Countries and its allies to act promptly to support the market amid the ongoing spread of the virus.
The oil demand is gradually decreasing while the supply remains sufficient. The ruble opened the trade consolidating gains after falling sharply against its major countreparts. The American Petroleum Institute reported on Tuesday that crude inventories in the US rose last week.
The data showed a less than expected increase. However, this fact didn’t support the prices. Today, oil traders will focus on the weekly inventory report form the US Energy Information Administration. The crude stockpiles are expected to show a 2 million barrel rise.
On Tuesday, Brent slipped below the support level of 55 dollars per barrel. The international benchmark opened today’s session trading in the red. Meanwhile, the American crude showed some signs of recovery after yesterday’s steep decline.
However, the bulls failed to maintain their positions probably because major market players are interested in further sales. West Texas Intermediate has tested a local low at 49 dollars 85 cents and dropped below this level.
The price broke through the support level which indicates a clear bearish trend. However, for the bears to gain momentum, the downward trend should be persistent and rapid. As for Brent, it was mainly influenced by the negative external background. Besides, the International Energy Agency outlook for global oil demand has put additional pressure on the oil quotes.
According to the forecast, oil demand in 2020 is likely to fall to its lowest level in a decade.
The possibility of low oil prices can encourage the OPEC to deepen its supply cuts in the near future. In this case, Brent may rebound and reach the level of 58 dollars a barrel. However, there is still a risk of prices slumping to as low as 53 dollars per barrel. The ruble has been extending losses over the past few days. The Russian currency plunged despite the fact that the US dollar index continued the downward movement.
At the previous close, the ruble lost 2% of its value against its American counterpart. Today, the peak of the tax payment period in Russia is over, so the national currency is no longer supported by the internal factors. If the negative background prevails, the dollar/ruble pair is very likely to hit the mark of 67.
At this point, it is very difficult to make any forecasts since any new reports regarding the coronavirus epidemic may change the ruble’s trajectory. Analysts do not rule out the scenario when the ruble may rebound to the level of 64.4 previously reached in February.