As you probably know, the recent oil summit in Qatar failed to end up with an agreement between all the participating oil-exporting nations to freeze their oil production quotas at the level of early January 2016. This triggered an instant reaction of crude oil and the Russian Ruble, which slightly lost a bit of the recently regained ground against the U.S. Dollar.
Financial experts are giving their forecasts for the near-term fate of crude oil and the Russian currency dependent on it. The instant crash seen after the summit was almost covered by the following recovery. At the same time, more experts say that there are no reasons to expect another longer-term crash in the near future. On the contrary, the prices may even continue their way up.
On Monday, right after the opening of Moscow exchange, the Russian Ruble dropped down to 68,8 RUB per USD. As we have already mentioned, the price drop was triggered by a failed oil summit in Doha. Oil prices saw an instant crash by 7% at a time. However, most of the move was later reduced to nothing by the following recovery. To be more specific, Brent oil saw its price drop all the way down to $40.07/b.
Some of the Russian oil companies also saw their market cap shrink on the summit news. As a result, Russia’s 7 major oil companies collectively saw their market cap shrink by 250 billion RUB. The MICEX index followed the tendency by dropping 1,98% down on the trading day.
Still, after the bearish reaction, both crude oil and the Russian Ruble started recovering from it. It is interesting to note that at this point the Russian currency and crude oil are tightly correlated and move in the same direction and almost at the scale.
What Next?
Some experts say that despite the disappointing results of the oil summit in Doha, the negativity was reduced to nothing by another event. We are talking about a strike in Kuwait, which cut the local oil production by approximately 1,6 million barrels. It is interesting to note that experts used to be measuring the oil oversupply by roughly this amount. That’s the key reason why oil prices are still above $40/b despite the failed summit.
Without it, the summit result might well create bigger problems for the global market of crude oil. But for the strike in Kuwait, Brent oil could have dropped all the way down to $35/b while the Russian ruble could have reached 70 or 75 RUB per USD.
Some other experts predict that the market may well remain volatile throughout the week. The price may drop a little bit this week but by the end of the year they expect oil prices to touch $50/b.
