27.08.2019: Crude oil reverses higher (Brent, RUB, USD)

27.08.2019: Crude oil reverses higher (Brent, RUB, USD)


Yesterday, oil prices recovered amid encouraging comments from the US and Chinese officials. Reportedly, the parties may resume negotiations. This news provided support to oil futures, so the downward trend reversed. However, the Brent crude benchmark remained in the red zone below 59 dollars per barrel at the market closing. Today, a negative sentiment prevails on the market. Technically, bears are in control, so the price may slide lower towards 54-55 dollars per barrel. Global Times’ editor-in-chief posted on Twitter that the Chinese and American negotiators had been communicating neither directly nor by phone for several days. There have been only technical contacts. Importantly, Beijing has not changed and is not going to change its position. China intends to resist the US pressure. However, despite the risk of a global economic slowdown, there are some positive factors that are preventing oil prices from falling lower. In particular, Donald Trump reminded investors about anti-Iranian sanctions and expressed readiness to resume negotiation on condition that Iran abandons its nuclear program. In response, Tehran stated that first the sanctions should be left and then the negotiations can be resumed. WTI quotes also remained near 2-week lows. However, the trajectory of the price movement is gradually reversing to the upside. The price has broken above 54 dollars per barrel in anticipation of the crude oil inventories data from the United States. Recently, Reuters agency has published the results of the preliminary survey that showed a fall in the US stockpiles of crude oil and
gasoline last week. At the same time, an increase in distillation products volume was registered. Traders pay close attention to the US inventories data as it is a leading indicator of the future demand. Today, the American Petroleum Institute will publish its inventories report while on Wednesday the Energy Information Administration will release the official figures. A sluggish growth in oil prices is providing little support to the commodity currencies, in particular the Russian ruble. The USD/RUB pair broke out of the trading range and moved above the level of 66.20. Today the ruble is declining as the tax period in Russia comes to an end. Tomorrow is the deadline for the extraction tax payments. Further on, the uncertainty over global trade wars puts the commodities and risky assets including the Russian currency under pressure. Within the first half an hour after the market opening the USD/RUB pair was trading near the level of 66.33. The ruble lost 0.4% from Monday’s closing quotes. On the flip side, the level of 67.00 is seen as the next downside target for the ruble. The Russian ruble is likely to remain in a tight trading range on the back of the dynamics in the Russian debt market. The Ministry of Economic Development has downgraded its inflation expectations, thus boosting the demand for fixed-income securities and for the Russian currency. We keep close tabs on the market developments. Stay tuned!

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