In the oil market is showing signs of change of trend. The agreement reached with Russia an agreement on production cuts was not too effective – the price of oil began to decline sharply, which immediately responded to the Russian ruble. And the blame for what is happening, as it turned out, the United States.
Before the price of oil collapsed by more than 5%. The reason for this dramatic growth of commercial stocks of raw materials in the United States, data on which were published on Wednesday. They were four times more than analysts had expected – by 8.2 million barrels last week.
On Thursday, oil continued to fall more than 2 PCT, Brent quotes fell below $ 52 per barrel, WTI – below $ 50. So low they fell for the first time since December of 2016.
In fact, the positive effect of lower production in the framework of the agreement OPEC was partly offset by growth in reserves and production in the United States. “American kancevica managed to increase production by more than 650 million barrels per day from lows in 2016, which is slightly less than half of the effect from the transaction to reduce production as part of the deal, OPEC+”, – said the chief analyst of “Nordea Bank” Denis Davydov. “In the U.S. this year production will grow by about 1 million barrels per day”, – says the head of analytical Department of Bank “Zenith” Vladimir Evstifeev. Thereby justified concerns that did not support OPEC oil producers, primarily in North America, can upset all the plans of countries that decide to reduce production.
“The oil reserves in the USA increased by about 50 million barrels since the beginning of the year, forcing to doubt the effectiveness of the OPEC deal,” says Hamza Khan from ING Bank, the Agency reports Reuter.
The deal is OPEC+ and all the efforts were in vain? Until the claim is that it would be premature, experts say. First, the deal had secured the oil above 50 dollars per barrel, which several months ago was not as expected.
Secondly, the production of shale deposits in the United States cost effective just under current price levels. This means that if prices decline in the range of 45-50 dollars per barrel, this again will slow down the activity of drilling rigs in the United States.
Besides, investors expect higher rates, the fed next week, and it will make loans to commodity companies, which are more expensive, said Georgy Vashchenko of IR “freedom Finance”. It can also slow the production of oil shale in the United States.
Thus, OPEC’s decision has already done its job, and now the big question is, will the exporters reduce their production. After all, until the deal is only for the first half of the year. “To cut production even more countries is not going to. This issue is closed, until the price is above $ 40 per barrel,” said Vashchenko.
“Actually it’s amazing that oil is still traded in a relatively narrow corridor 53-57 dollars. Oil may reach $ 50 per barrel of Brent. But the drawdown is unlikely to be long-term. I believe that before the end of the month the oil will be traded mostly in a wide range of 50-60 dollars, says Vashchenko. – The world has adapted to current levels, so a wide corridor may persist for years.”
Davydov expects that oil is a “new” levels of 50-55 dollars per barrel for Brent.
Interestingly, the growth of stocks of crude oil in the United States was continuous from the beginning of the year but the market only now reacted to the fall of quotations. “Every time the market ignored the data. It is obvious that at constant external conditions ripe for a correction,” explains Davydov. Next week investors expect the growth rate of the U.S. Federal reserve, which may also cause a further decline in oil prices.
Of course, all this affects the Russian currency. “The reaction of the ruble to the current correction in the black gold still looks understated. The Russian currency continues to hold positions in the pair with the us dollar to below $ 60. In favor of the ruble works by the fact that the public debt market, there is not a mass sales,” says Davydov. However, the pressure on the ruble will only increase. Especially if in the oil market will be dominated by pessimism. “According to our estimates, the ruble may lose three to six percent of the current cost if Brent will head to $ 50 per barrel”, – the expert says “Nordea Bank”.
Vashchenko considers that the ruble finished stronger, and in the next three weeks the dollar will be worth 59-60 rubles.
As for the Russian economy as a whole, it is too early to say that risks have increased markedly. “In the case of a return to low oil prices, we naturally get less results for all key components in the economy”, – says Davydov.