28.05.2020: RUB likely to test 69 mark against USD even despite slight drop (Brent, USD/RUB)
Over the past few days, the energy market has been under pressure. The mounting tension between the US and China will serve as a risk factor in the nearest future. Both benchmark oil grades may finish the week moving notably lower.
Meanwhile, the global market sentiment remains rather positive as traders continue to ignore the rising US-China tensions and prefer to focus on the revival of the global economy. The energy market, however, is facing the downward pressure for the second consecutive session. In the morning trade, investors were evaluating the unexpected rise in the US crude inventories. According to the American Petroleum Institute, oil stockpiles increased by 8.7 million barrels last week which came in sharp contrast to analyst predictions.
In the early trade, Brent oil futures for July slipped to 34 dollars per barrel having lost more than 1.5% of their value. On Wednesday, the North Sea oil edged lower by almost 4% by the end of the session. The nearest WTI contract dropped to 31 dollars 90 cents per barrel in the first half of the day losing 2.5%. Yesterday, West Texas Intermediate crude fall by 4.48%.
However, traders managed to shrug off this negative factor, and by mid-session oil price went higher again. As a result, Brent crude rose above 35 US dollars per barrel.
Later on Thursday, market participants will focus on the report from the US Energy Information Administration. It is expected to show a drop in oil inventories by 1.2 million barrels.
A possible disagreement between members of the OPEC+ may also weigh on oil quotes. During a telephone call on Wednesday, the leaders of the two major oil-producing countries, Russia and Saudi Arabia, discussed their further cooperation. Riyadh insists that current output cuts shall remain in place at least until September. However, according to Bloomberg, Russia plans to increase oil production already in July.
In case the current OPEC+ agreement on output cuts remains unchanged after the cartel’s meeting in June, both oil and the ruble will receive considerable support.
The dollar/ruble pair opened the session moving above the level of 71. Later, the pair faced the correctional decline. In the mid-trade, the ruble managed to gain momentum and advanced against the US dollar to the mark of 70.88.
So far, the dollar/ruble pair has been trading in the range between 70.60 and 72.10. At the moment, the major currencies are extending weakness against the US dollar. Therefore, the Russian currency may stay under pressure until the start of the US session. It is still possible that the ruble may rise to the level of 69 against its American counterpart..
The situation in the market may change any time by the end of the day. The conflict between China and the US will contribute to high volatility. In addition, market participants will be closely watching the macroeconomic data from the US. The news about the state of the US economy and labour market will determine the traders’ sentiment later in the afternoon.
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