19.02.2021: Oil loses upside momentum (Brent, USD/RUB).
Oil has entered the phase of correction with the first target for Brent at 60 dollars per barrel. A fall in the energy market may trigger a sell-off wave on the ruble. Investors may want to take profit ahead of the weekend. Over the past few weeks, the oil market has been overbought both from the fundamental and technical points of view. Weather conditions in the US are expected to improve on Saturday which helped change the situation in the market. Oil prices are pulling back from the level of 65 dollars a barrel. On Friday, oil opened the session moving lower by more than 1%. Brent futures contract with the nearest expiration was trading just above 63 dollars a barrel. However, the price is likely to break through this level very soon. It is also possible that Brent will slip to 60 dollars a barrel. So, oil bears may well push the quotes to a more justified value of 55 dollars a barrel. The North American crude is following a similar trajectory. WTI broke below the yearly high of 60 dollars a barrel to trade at 59 dollars 50 cents in the early session. The official data from the US Energy Information Administration confirmed a drop in oil inventories. The decline turned out to be bigger than those predicted by the API. However, the report was not enough to stop the downtrend in oil that had already started. Market participants have switched their attention from the freeze in Texas to the work of oil refineries. Crude prices fell on Friday on worries that refineries will take time to resume operations, thus denting oil demand. Weaker demand for crude oil will in turn lead to a rise in oil stockpiles in the coming weeks. This may happen even despite the fact that one-third of the US crude oil production has been shut down. What is more, investors will focus on the OPEC+ and new terms of the deal on output cuts later in April. Given that oil prices have recovered, the members of the alliance may want to ease the curbs on oil supply. Although oil is losing upside momentum, the correction may be not as deep as expected. Brent bulls can manage to hold the price above the level of 63 dollars a barrel, at least until new negative factors emerge. The current market sentiment is mixed. The ruble is losing ground against the US dollar due to the falling crude prices. Foreign investors tend to evaluate the ruble based on the situation in the energy market. So they might start taking profit soon. In general, relatively high oil prices continue to support the Russian currency. Besides, the tax payment period in February is also on the side of the rube. A slight pullback in the federal loan bonds from yesterday also helps keep the ruble afloat. However, this is a minor factor. Volatility is expected to increase ahead of the long weekend in Russia. On Saturday, the market will be operating, but trading activity is expected to be low due to the lack of foreign market players. On Friday, the dollar/ruble pair is moving upwards to test the level of 74.7. The threat of sanctions weighs on the ruble. At the beginning of the next week, the EU countries may discuss the possibility of introducing economic restrictions against Russia. In this case, the sell-off wave will increase, and the dollar/ruble bulls will have a chance to reach the 75 mark and break above it.
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