13.03.2020: RUB growth does not encourage traders (Brent, USD/RUB)

13.03.2020: RUB growth does not encourage traders (Brent, USD/RUB)


There are some traces of optimism in the global oil market. Earlier today, oil prices gained over 5%. However, the commodity is on track to close the week with the steepest loss since the crisis of 2008. The Russian ruble benefits from modest recovery of oil prices. The ruble rose over 2% against the US dollar on early Friday. On Thursday, global markets were trading under extreme volatility. Today trading floors look oversold, so a technical bounce is a logical turn which is widely expected on Friday. Besides, traders are going to close short deals before the weekend. Oil prices rebounded from one-year lows. Both benchmark grades are trading higher. On Friday morning, Brent futures climbed to 34 US dollars 60 cents a barrel. WTI contracts grew to 32 dollars 73 cents a barrel. Nevertheless, both grades are heading for
the biggest weekly loss of over 20%. Oil prices have been weighed down by evaporating demand and a flood of low-priced oil from Saudi Arabia. At present, it would be risky to open medium-term long deals. Brent crude will hardly climb above 40 US dollars a barrel until large oil exporters agree on new production cuts. In light of statements from oil officials, the new pact will not be settled in the near future. It goes without saying that there is no winner in a trade war. In other words, the parties involved in the
conflict will have to negotiate sooner or later. According to the optimistic outlook, Brent crude could rise to 31 – 39 US dollars a barrel. The pessimistic outlook suggests a slump to 27 dollars a barrel. Meanwhile, global central banks are pumping up markets with liquidity. The Federal Reserve offers short-term loans and enlarged a range of US government bonds to satisfy demand. This move calmed down market participants. So, they are betting on another rate cut at the Fed’s policy meeting next Wednesday. Currencies of emerging markets are making efforts to recover. The ruble finds support from rising oil prices. It is expected to win back some of yesterday’s losses. On early Thursday, the ruble grew over 2% to 73.09 against the US dollar. Later on Thursday, the ruble weakened to the level above 75. Nevertheless, there are no fundamentals for serious and steady recovery of the Russian currency. Investors are pessimistic about the ruble. Its collapse could fuel high inflation, so investors could respond with massive sell-offs of federal loan bonds. The tax filing period is due to start on Monday in Russia that could support the ruble. The Bank of Russia is going on with forex interventions. On Tuesday and Wednesday, the central bank sold US dollars equal to 3.6 billion rubles each of these days.

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