Oil at a crossroads

1

На нефтяном перепутье

Why the ruble is now dependent on Saudi Arabia and Iran

The financial world froze in anticipation of the weekend in the hope that the meeting in Doha, Qatar, the largest players in the global oil market will be able to agree about the freezing of production of black gold. The results of this summit especially important for hydrocarbon corporations and traders in the commodity markets. And in Russia, there is another factor — the fate of the ruble. There are substantial grounds for believing that the domestic currency will collapse or, conversely, will rise sharply in price, depending on the outcome of negotiations.

Extra volume

At the beginning of the year surplus in the oil market was, according to various estimates, from half to two million barrels a day. By mid-April the situation has changed little. In some places the oil under pressure from the ultra-low price really decreased. For example, in the U.S. — 2 percent, to 9 million barrels a day. But in Russia, production increased 0.5 percent. About oil production in Iran is difficult to judge, but exports there have increased by almost a third.

And yet in recent months, the oil slowly but fairly steadily. If at the beginning of the year the price ranged around 30 dollars a barrel, now conventionally fixed above $ 40. That is, growth in excess of 30 percent. For such a jump requires serious reasons.

It’s all in the expectations of market participants about the fateful decisions of OPEC and other major producers. There were hopes that they will go on reducing or at least freezing production. The logic is clear: the market is necessary to clean relatively little oil for a serious rising prices, and a few leading countries could do it together, losing a symbolic amount of export revenue.

While we are talking about is to freeze the output, and not at the level of last year, and at levels achieved in early 2016. As already mentioned, with the New year there was an increase of volumes in the quest to squeeze out of their prey all to the last penny. And yet in February reached a preliminary agreement is already significant progress. Previously, such agreements were not on the horizon even at the level of OPEC. Now to work on the agreement involved Russia, which do not limit the extraction of oil difficult for a number of reasons, from macroeconomic (country in crisis desperately needs export revenues) to pure technology (in our climate you can’t just stop the oil rigs).

На нефтяном перепутье

Some experts assume the rise in oil prices to 80 dollars per barrel

Photo: Ebrahim Noroozi / AP

The second round

April 17 will be held the second and probably decisive round of talks. On the eve of the upcoming summit of the oil has risen to 44 dollars per barrel and the ruble jumped the most in five months values.

While the positions of the parties contradictory information is received. So, sources in the diplomatic circles confirmed that the two key participants of the negotiations — Russia and Saudi Arabia — agreed to freeze production. In fact, it is Russia and Saudi Arabia is now the main newsmakers from Doha. The other significantly limited in the maneuver, primarily because they have no special potential for expansion of production.

But there is an exception — Iran. Not only do the Islamic Republic with the Saudi Kingdom most acute geopolitical contradictions, so they are still direct competitors as exporters of oil. Iran is very resentful that as a result of the sanctions imposed in 2012 and lifted at the end of last year, has lost its share in the global market. Republic hopes to restore everything, but in current conditions it is possible only at the expense of those or other competitors.

Iran still refuses to cooperate on this issue. Production capacities of the country allow us to relatively quickly increase production by a million barrels. Then Iran will be able to recover your share lost in 2012. And yield in Tehran has no plans. It is reported that Iran’s oil Minister Bijan Namdar Zanganeh not even going to go to Doha to negotiate.

As to these demarches will react to the Saudis, it is difficult to say. On the one hand, Russian diplomatic sources, Riyadh has take a decision without regard to the position of Iran. On the other, April 1 Prince Muhammad bin Salman has explicitly stated that the Kingdom is ready to freeze the prey only in the case if Iran go at it. It is possible that the position of Saudi Arabia in recent days has changed, but certainly nothing to say.

На нефтяном перепутье

If the dollar falls too much, may intervene the Bank of Russia

Photo: Sergey Bobylev / TASS TASS

This raises serious concerns that even such modest results as freeze production at current levels (reduction in speech production for a long time already is not), could not be achieved. And then the oil market is waiting for another heavy collapse. So consider, for example, analysts at the largest investment banks of USA Goldman Sachs and Citigroup. In their opinion, the loud collapse of the negotiations will signal to a sharp decline in prices. Moreover, largely because the market was preparing for summit, and the members actively promote it in the media.

Oil at 80 to the us 60

Not the whole financial world shared such sentiments. “Until all goes to the fact that certain agreements in Doha will be achieved,” — said in an interview with “Tape.ru” a leading analyst of PSB Alexey Egorov. A positive outcome of the meeting in Qatar will support the quotes above $ 40 per barrel in the medium term, he said.

Overall, according to the Bloomberg survey, the major traders believe that the market is “all will be well”. As the head of the Gunvor Thorbjorn tornkvist, the price of oil will go up, although accompanied by strong volatility. Pierre Anduran from London hedge Fund Andurand Capital Management and all expressed confidence that this year the price will overcome a mark in 60 dollars for barrel, and in the following reached $ 80.

Somewhat less optimistic associate Professor of Economics Anton Tabah. “In my opinion, the current prices already incorporated the successful outcome of the negotiations. Above $ 45, if the quotations and leave only for a short while. Don’t forget that the Saudis are unreliable partners and can make unilateral decisions, there are always problems with the implementation of the decisions of OPEC,” he explained “the Tape.ru”. And according to Alex Baird, a representative of one of the largest trading companies Glencore, the market has formed industrial reserves of 300 million barrels of oil, and the rebalancing will take time.

In any case, it seems that upon successful completion of negotiations, the oil will at least remain at current, relatively high level, and then you move upwards. What will happen with the ruble? Logically, it will be strengthened — if will not interfere with additional factors.

So, we cannot ignore the fact that the state represented by the government and the Central Bank will take additional effort to keep the ruble jumped too much. According to the Minister of Finance Anton Siluanov, the government has prepared new budget rule that if expensive oil all additional income is withdrawn into the reserve Fund. What is clear — expensive ruble, a blow to all the plans for import substitution.

Artificial intervention by the Central Bank and the Cabinet in the situation allows and Aleks. “Against this background, the dollar may fall below the level of 65 rubles. If the U.S. currency will fall in the area of 60-65 rubles, the market can get the Bank of Russia to buy foreign currency in reserves, and this will limit the potential strengthening of the ruble,” he said. If the negative scenario and in Doha about anything do not agree, the dollar will return to 68 rubles and above, the analyst said.

LEAVE A REPLY

Please enter your comment!
Please enter your name here