Brent swoops down despite OPEC agreement

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Brent crude oil continues to decline, despite OPEC’s agreement regarding the reduction of production. The price of oil for delivery in February fell today by almost 4% to close the previous trading session, to $57,27 per barrel, the lowest level since Oct 2017. We will remind, quite recently, OPEC and outside the cartel States were able to agree on new production cuts from January 2019 at 1.2 million barrels per day compared to October 2018. However, the market is not sure that the oil exporters will really go for production cuts.
OPEC countries have many times reaffirmed the saying that promise – not to marry. If suddenly the fed will give the market a new benchmark that the rate hike cycle is not over yet, the fall in oil prices could accelerate. But even without this “bubble” in the U.S. stock market carries very serious risks. If it ruptures before our target on S&P in 1800-2000 points, Brent can easily fly to $30-35 for barrella.
The consequences for the Russian budget and ruble will be dramatic, but not fatal. If the Bank of Russia will not intervene in trading on the background of cheap oil again, the quotations of the dollar reached 80 rubles, and the Euro will easily exceed the level of 90 rubles. Russia is much less dependent on imports than ten or even five years ago. With international reserves estimated at about $460 billion.
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Alexander Razuvayev,
The Director of analytical Department,
Alpari