26.10.2020: RUB aims at 75 against USD (Brent, USD/RUB)

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The energy market is under pressure today. Oil bears can easily push Brent below 40 dollars per barrel at the start of the week. The ruble’s rise has been put on halt, but it can resume its uptrend if market sentiment improves.
A surge in Covid-19 cases in Europe has dragged the markets lower. Besides, the upcoming US presidential election causes high volatility in the markets. A wave of sell-off in the morning trade could be triggered by the rise of active oil rigs in the US.
Another negative factor comes from Libya which ended its force majeure on exports from two key oil ports. On Monday, the country’s National Oil Corporation announced the reopening of major Libyan oilfields and ports. The company plans to increase its oil production to 1 million barrels per day within a month. This can pose another challenge to the OPEC+ agreement.
Brent futures contracts for December lost more than 2% in the early session to settle at 40 dollars 90 cents per barrel. WTI oil futures with the nearest expiration showed similar dynamics and traded at 38 dollars per barrel. Both benchmarks finished last week with losses: Brent was down by 2.7%, while WTI dropped by 3.1%.
Another factor to weigh on oil prices is the uncertainty around fiscal stimulus package in the US. If the White House and Democrats fail to reach a compromise this week, oil is sure to fall even lower. In this case, Brent may test the support level of 38 dollars 80 cents per barrel. From the fundamental viewpoint, Brent will most likely hold within the range between 38 and 40 dollars a barrel.
Oil has hit its three-week low which has negatively affected the ruble. The ongoing pandemic puts additional pressure on the Russian currency. Amid a record number of new coronavirus cases recorded worldwide, investors prefer to avoid commodity and risk assets and flee to the safe haven of the US dollar.
Today, the US currency managed to win back some of its previous losses. Yet, the ruble is still holding at comfortable levels. The tax payments made by non-resident companies and currency interventions carried out by the Bank of Russia help offset the negative background.
Notably, on Friday, the ruble reached its one-month high against the US dollar. It was also the biggest weekly gain this year. The dollar/ruble pair edged lower by 2.3% mainly due to the overall weakness of the greenback.
At the moment, the ruble seems quite overbought and is unlikely to break through the 76 mark against the dollar. Under favorable conditions, the level of 75 may become the nearest upward target for the ruble.

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