On Thursday, April 2, world oil prices showed a sharp jump in international trading. In the middle of the day, the cost of Brent crude on the ICE exchange in London grew by an average of 6%, to $ 27 per barrel, but already in the evening the growth accelerated to over 40% in the moment, and quotes exceeded $ 36. After that, the prices were slightly adjusted and are currently close to $ 30 per barrel.
According to experts interviewed by RT, investors reacted violently to Donald Trump's statement about a possible reduction in global oil supply. In particular, the American president expects a sharp decline in hydrocarbon production by Russia and Saudi Arabia in the near future.
“Just talked with my friend Mohammed bin Salman Al Saud, the Crown Prince of Saudi Arabia, who spoke with Russian President Vladimir (Vladimir. - RT ) Putin, and I expect and hope that they will reduce (production. - RT ) by about 10 million barrels, and possibly much stronger, ”wrote the head of the White House on Twitter.
After that, Trump also added that the volume of reduction in oil production could reach 15 million barrels per day.
It is curious that the Kremlin refuted Trump's words about the conversation between Vladimir Putin and the Crown Prince of Saudi Arabia. According to the press secretary of the Russian leader Dmitry Peskov, "there was no such conversation." About this writes TASS.
Meanwhile, immediately after the message of the American president, Saudi Arabia announced the need to hold an urgent meeting in the OPEC + format and called on other countries - exporters of raw materials to also join the meeting. According to the Saudi Press Agency, negotiations are necessary to "reach a fair agreement that will restore the desired balance in the oil markets."
“The observed verbal interventions do not yet solve the problem of a huge excess of oil in the market and falling demand, but they stimulate quotes to grow. Therefore, it is likely that now oil will react very strongly to such statements by the parties, now cheaper, more expensive. Quotation stability will be achieved only when the market comes to a balance, but for now we can expect prices to return to the level of $ 30–33 per barrel, ”said Artyom Deev, head of the AMarkets analytical department, to RT.
Rebooting OPEC +
Recall that in March, world oil prices collapsed almost twice, and the price of Brent crude at the moment fell below $ 22 per barrel - for the first time since 2002. One of the main reasons for this dynamics, RT experts surveyed consider the collapse of the OPEC + deal.
Amid falling global demand for energy sources due to the coronavirus pandemic, the parties to the agreement, including Russia, tried to agree on an additional reduction in hydrocarbon production in order to stabilize the market situation. However, on March 6, following the meeting, the parties did not reach consensus and decided to completely abandon all obligations undertaken earlier.
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- © Leonhard Foeger / File
Starting April 1, energy exporting countries began to increase oil production and export. According to experts, such actions risk turning into a significant increase in the supply of raw materials on the world market and an even greater reduction in prices.
Moreover, news on the spread of coronavirus continues to exert pressure on the cost of raw materials. According to official data from the World Health Organization (WHO), the total number of people infected in the world exceeded 896 thousand, more than 45 thousand infected died.
According to the International Energy Agency (IEA), as a result of restrictions on air travel and quarantine measures, global energy consumption could be reduced by almost 20% (about 20 million barrels per day).
Against this background, experts do not exclude the possibility of creating a new agreement on the global energy market with the participation of Russia, the United States and OPEC countries to restore the balance of supply and demand. According to RT, a leading Forex Optimum analyst Ivan Kapustyansky, the conclusion of such a deal will return the cost of oil to the range of $ 40-60 per barrel.
“The contract will be beneficial for each of the parties. The budget of Russia and Saudi Arabia depends on oil and gas revenues by 30% and 80%, respectively. In the United States, this dependence is lower, but the bankruptcy of an entire industry can cause a chain reaction and draw other industries into the crisis, in particular banking, which generously lends to shale. In a pandemic and upcoming elections, Trump may be quite accommodating with other players, ”Kapustyansky added.
Currency response
It is noteworthy that the Russian foreign exchange market reacted positively to a sharp jump in oil prices. So, in the evening on the Moscow Exchange, the dollar depreciated by 1.9% - to 77.3 rubles, and the euro - by 2.6%, to 84 rubles.
According to Vyacheslav Abramov, director of the BCS Broker sales office, RT, before the end of April, the dollar will be in the range 76–81 rubles and the euro at 84.6–89 rubles. At the same time, as the possible increase in oil prices by the end of 2020, the dollar may again return to around 70 rubles, the analyst said.
“Most likely, after passing the peak of the coronavirus pandemic and possible new agreements by oil market participants, we will be able to observe an upward trend in oil prices near the end of the year at $ 40 per barrel. Along with this, the Russian currency will receive support, and the dollar exchange rate may drop to 70–72 rubles, and the euro exchange rate to 76–78 rubles, ”concluded Abramov.