Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Markets Failing to Give Another AI Mega-trend Buying Opportunity - 6th Jun 20
Is the Stock Bulls' Cup Half-Full or Half-Empty? - 6th Jun 20
Is America Headed for a Post-Apocalyptic Currency Collapse? - 6th Jun 20
Potential Highs and Lows For Gold In 2020 - 5th Jun 20
Tying Gold Miners and USD Signals for What Comes Next - 5th Jun 20
Rigged Markets - Central Bank Hypnosis - 5th Jun 20
Gold’s role in the Greater Depression of 2020 - 5th Jun 20
UK Coronavirus Catastrophe Trend Analysis Video - 5th Jun 20
Why Land Rover Discovery Sport SAT NAV is Crap, Use Google Maps Instead - 5th Jun 20
Stock Market Election Year Cycles – What to Expect? - 4th Jun 20
Why Solar Stocks Are Rallying Against All Odds - 4th Jun 20
East Asia Will Be a Post-Pandemic Success - 4th Jun 20
Comparing Bitcoin to Other Market Sectors – Risk vs. Value - 4th Jun 20
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Crude Oil Foretells Additional Ruble Losses

Commodities / Crude Oil Jan 21, 2016 - 04:23 PM GMT

By: AnyOption

Commodities Warnings from the IEA and new lows in key global benchmarks continues to weigh on the outlook for energy prices, hurting the foremost global oil and gas exporters.  Russia has experienced a reversed rags to riches tale over the last two years as the impact of sanctions and the slump in the energy patch have kept the Ruble under extreme pressure.  The underperformance continues to echo the losses in oil prices as the supply and demand imbalance remains largely unchanged, only set to grow in coming months with the expansion of Iranian crude oil exports.  With market dynamics expected to be weak and existing projections forecasting no rebound in prices, the weakness in the Ruble is only likely to accelerate over time, matching losses in oil prices.


Russia’s Shifting Tides

Fortunes have rapidly shifting in Russia over the past two years as biting sanctions combined with the parallel drop in oil and gas prices have seen gains of the last two decades quickly reversed.  In the period leading up to the spat with Ukraine, Russia experienced the strongest growth since the fall of the Soviet Union as it rapidly improved its global standing and increased its spheres of influence.  However, the situation in Ukraine and growing hostilities in Syria could not have come at a worse time for the Russian Government which has had to confront crises on multiple fronts. 

The painful economic contraction of the last year has left no stone unturned for the country as it contends with high inflation, rising unemployment, and a deep recession.  With oil and gas revenues accounting for the single largest portion of Government revenues, the precipitous slide outweighs other geopolitical developments as far as importance on the outlook for the Ruble.  With oil prices not expected to cross the threshold of $50 per barrel before 2020 according to the current futures curve, Russia will have to contend with prices remaining lower for longer.

Production Remains High

According to the latest estimates from the International Energy Agency, global oil markets are set to “drown in oversupply” until the end of 2016 at the very earliest.  The changing dynamic in the Middle East with the onset of renewed Iranian exports and growing production amid largely stagnating energy demand has set the stage for further declines in prices.  Supply is predicted to continue outstripping demand by 1.50 million barrels per day at least through the first half of the year.  Already, both the Brent and West Texas Intermediate benchmarks have responded in kind, with oil prices falling to new 12-year lows earlier in the week amid continued momentum lower in prices.

Russia, which recently overtook Saudi Arabia as the world’s biggest crude oil producer, is already anticipating tougher times to come after slashing the Government budget by 10% for the upcoming year.  Russia has promised it will be unrelenting in its levels of production even if crude prices continue to fall.  Some estimate prices could fall below $10 per barrel before Russia would contemplate production cuts.  Thanks to the lack of intervention in the Russian Ruble by the Central Bank, the free-floating currency has mirrored the fall in energy prices, helping to offset some of the losses.  With oil prices unlikely to hit major support until the low $20s and high teens, the Ruble will likely shadow the developments, responding in kind with additional weakness as the USDRUB hits new record highs.

Ruble Breakout Just Beginning

After setting up in an ascending triangle pattern for the better part of a year, consolidating between resistance at and a prevailing uptrend, the USDRUB broke out to the upside back in December in a sign the trend higher is set to persist over the coming months.  When taking into account IEA forecasts and market expectations, further losses in crude oil prices are likely to see a strong inverse correlation with the USDRUB pair based on Russia’s dependence on the critical energy export economy.  The pair hit new multi-year highs today, mirroring the drop in oil prices to new multi-year lows as the acceleration lower in global equity markets has spread to other asset classes.

Although initiating long positions at the present price in the USDRUB is not suggested, especially with the RSI clearly in overbought territory owing to the near vertical and parabolic momentum higher in currency pair, pullbacks should be viewed as an optimal opportunity to establish and add to positions.  The Ruble is unlikely to see fortunes improve until oil and gas prices bottom out and begin on the path towards a sustainable rebound.  In the meantime, the 50 and 200-day moving averages will continue to act as key support levels for prices.  It is very important however not to chase after momentum higher, as the volatility in the pair is only expected to pick up in the coming weeks. 

Buy the Dip

Although 2016 is not necessarily destined to be the best year for risk-assets, buy the dip is a worthwhile strategy when it comes to trading the US dollar versus emerging market currencies.  The pace of outflows and increased risk-aversion gripping financial markets globally means that any pullback and correction should be exploited to add to existing core positions on the ride up in the USDRUB pair.  With the geopolitical and underlying economic conditions unlikely to improve in the coming months, the Ruble is only likely to give further ground versus peers.

Anyoption™ is the world's leading binary options trading platform. Founded in 2008, anyoption was the first financial trading platform that made it possible for anyone to invest and profit from the global stock market through trading binary options.

Our goal here at Market Oracle is to provide readers with valued insights and opinions on market events and the stories that surround them.
Website anyoption.com

© 2016 Copyright  Anyoption - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules