On Wednesday, April 22, trading in the global energy market show uncertain dynamics. So, at the beginning of the session, the cost of futures for raw materials of the reference brand Brent for delivery in June decreased by more than 17% and at the moment reached $ 15.98 per barrel. The value has become the lowest since June 1999.
In the second half of the day, quotations somewhat recovered - to the level of $ 18-20 per barrel, but at the same time they still remain near multi-year lows.
The cost of June futures for raw materials of the American brand WTI also decreased at the beginning of trading by 6% - to $ 10 per barrel, after which it strengthened to $ 11-12.
Recall that on April 20 and 21 the price of an exchange contract for the supply of WTI oil in May for the first time in history fell below zero. According to experts, the collapse of global demand for hydrocarbons due to coronavirus has led to almost full utilization of the world's oil storage facilities. As a result, it became impossible to carry out new deliveries of raw materials, and contract holders were ready to pay for their refusal of the futures.
According to the head of the Ministry of Energy of Russia Alexander Novak, OPEC + countries are closely monitoring the situation and, if necessary, have "all the opportunities for response." The minister told reporters on April 22.
“The oil market is now in a very volatile state due to a sharp drop in demand associated with measures to counteract the spread of coronavirus, the gradual overstocking of storage facilities and the uncertain timing of the global economic recovery,” Novak explained.
Starting May 1, in order to combat an overabundance of oil in the global market of the country, the OPEC + participants will begin to reduce the production of raw materials by 9.7 million barrels per day. At the same time, a decrease in production should begin in the USA, Norway, Argentina and Canada.
As Alexander Novak previously stated, as a result, the total volume of reduction in the production of raw materials by world exporters may amount to 15-20 million barrels per day. Meanwhile, investors fear that the measures taken will not be enough to balance the market and maintain prices.
“The fall in oil prices on Wednesday continued, as the growing concern is the possibility of filling all world oil storage facilities within one or two months. Considering the fact that oil demand fell by 25-30 million barrels per day, and the reduction in oil production will begin only in May and will be only 20 million barrels per day, market participants are less and less confident in the prospects for rising oil prices in the short term ” - said RT portfolio manager of QBF Denis Ikonnikov.
The negative situation on the global energy market affected the cost of Russian raw materials. According to the latest data, on April 21, a barrel of Urals oil fell from $ 17.5 to $ 11.6. This is stated in the report of the analytical agency Argus.
According to experts, in a coronavirus, a collapse in energy prices increases the burden on the Russian budget and the country's economy as a whole. Meanwhile, according to analysts, Russia will be able to compensate for the increased losses due to the high volume of accumulated reserves and funds of the National Wealth Fund (NWF).
“Due to low oil prices there will be a shortfall in budget revenues, which will lead to its deficit. Also, because of the coronavirus, additional resources will be used to support business and the economy, which is likely to lead to a decrease in the country's GDP by the end of the year. However, we have gold and foreign exchange reserves and the NWF, so you should not expect any disaster, ”Vyacheslav Abramov, director of the BCS Broker sales office, told RT.
Mixed reaction
It is curious that the Russian foreign exchange market has ambiguously reacted to a sharp reduction in the price of oil. On April 22, during the opening of trading on the Moscow Exchange, the dollar and euro rates rose briefly by 0.5% to 77.5 and 84.1 rubles, respectively, but in the middle of the day fell by 0.9% to 76.3 and 82, 9 rubles.
The official exchange rate of the Central Bank as of April 23 is set at 77.04 rubles per dollar and 83.68 rubles per euro.
According to analysts, the key support for the national currency is provided by the tax period and the actions of the Bank of Russia. Recall, to stabilize the ruble since March 10, the Central Bank began proactive sale of foreign currency on the domestic market. Thus, the regulator artificially increases the demand for rubles.
“The Bank of Russia has increased foreign exchange interventions to support the ruble to $ 225 million. Moreover, now the tax period is on, and the ruble receives additional help from exporters selling foreign currency to pay taxes,” said Vyacheslav Abramov.
As expected, further fluctuations in the ruble exchange rate and oil prices will largely depend on the dynamics of the spread of coronavirus. According to experts, the possible easing of the pandemic and the removal of quarantine restrictions will lead to the resumption of transportation and the work of a number of industries in the world. Thus, the demand for energy raw materials will be restored, and oil prices will gradually increase.
“It is likely that until the end of spring, oil prices will remain volatile and will fluctuate in the range of $ 10-25 per barrel of the Brent brand. However, by the end of the year, the figure could recover to $ 40 per barrel. Under these conditions, the dollar in the short term will be in the range of 75-80 rubles, and the euro - near 82-88 rubles. But closer to the end of the year, these values may drop to 70 and 77 rubles, respectively, ”concluded Abramov.