On March 6, the ruble has experienced another “black Friday”. The dollar soared for a mark of 68 rubles, while the Euro went above 77 rubles, follows from the data of the Moscow exchange.
Active reduction of the ruble began after the news about the differences between Russia and OPEC on reducing oil production. On March 5, OPEC agreed to cut production by 1 million barrels per day in the second quarter of 2020, if countries outside OPEC, which are included in the deal, will reduce production by an additional 0.5 million b/d. However, Russia even before the official negotiations in Vienna rejected the proposal. Against additional cuts made and Kazakhstan.
Amid expectations OPEC decision+, on Friday afternoon, world oil prices fell by 5%. Brent crude was less than $ 48 a barrel, and then, after the failure of negotiations, OPEC, and went below $ 46.
Earlier it was reported that because of falling oil prices, the gap between the market quotes and price cut the budget rule ($ 42.4 per barrel of Urals grade in 2020) dropped to minimum values for the duration of this rule in Russia. The current fall of oil has reduced this gap even more.
The problem here is that Russian authorities can’t go against the flow — to keep the ruble falling oil. Otherwise, they will have a faster pace to spend to maintain the rate of foreign exchange reserves. According to analysts, the financial authorities of the Russian Federation will gradually weaken the ruble to 70 rubles./$. But if the drop of oil will become a trend, they will not keep the ruble at any cost. And then we will see a completely different picture of the world.
It is estimated that in the absence of a fiscal rule, the annual decrease in oil prices by $ 10 per barrel gives the attenuation rate of 5 rubles per dollar. But this is only in theory. In practice, the cut-off price was always higher than the official.
The meaning of the cut — off the money from the sale of oil over a certain level go to the national welfare Fund. But in reality it was not so. If we analyze the figures for past years, actual budget surpluses have always been more than the sum, which eventually came into the NWF.
Money “dried up” because the government of them formed their own reserve Fund, and also had the opportunity to temporarily dispose of the funds accumulated on the accounts of the Treasury — they are not immediately transferred to the Fund, but only at the end of the year.
Now these stashes no, Cabinet and de facto recognized that it will use the NWF funds to Finance the social promises of President Vladimir Putin.
In fact, now the price of balancing the budget is closer to $ 48 per barrel. So now that oil has fallen below this mark, the Russian budget should feel very hard.
Of course, while the Kremlin is pursuing constitutional reform, the authorities are interested in financial stability. It is necessary to hold a referendum in a calm atmosphere. So in the coming weeks the authorities will be to minimize fluctuations in the ruble exchange rate and strikes at the vulnerable layers.
But when the transit authority is complete, the hands of the Kremlin will be unleashed. Then, it is not excluded, the government will declare force majeure on all the social obligations, not only on the pension. And citizens may once again feel on the skin, what is shock therapy.
— OPEC is not as strong as people think, — said the President of the Union of entrepreneurs and tenants of Russia Andrei Bunich. Yes, the cartel was a very influential three decades ago. But as soon as the market for “paper oil” divorced from the real, OPCA has lost a significant share of influence: the amount of the actual oil less “paper”. Besides, if earlier the world energy consumption per capita grew, by 2008, the growth stopped. In fact, to make the transition to the era of energy saving.
Paper oil market, OPEC plays the role of speculative element — only. First, the speculators are driving the expectations, then they pierce this temporary bubble. In fact, OPEC is just a front for the global speculative game, and not from the cartel determines how much oil will cost.
“SP”: — Russia is right to refuse to further cut production?
— Russia took a completely natural position. And before she will notice the production is not particularly cut — only participated in the signing of agreements. But now it’s time to cut the actual prey, and Russia to do is stupid. If you reduce the supply, we will simply lose market share.
“SP”: — Falling oil prices — an indication that the world economy will slide back into crisis?
There is a more important indicator than oil, a factor. February 3 the Federal reserve held an emergency meeting and decided to reduce the key rate by 0.5 percentage points, to the level of 1-1. 25%. In its statement, the regulator noted that while the macro parameters of the U.S. economy remain strong, the spread of coronavirus is a growing risk to economic activity.
However, tellingly, the markets that lowering interest rates did not react. Everything was falling, continued to decline — in fact a numerical oil.
This lack of response has become a kind of indicator: the players understand that the situation is very serious. Now the fed was very narrow field for maneuver. Everyone understands that that is the limit. Then can come the Apocalypse, because all the resources to influence the market developed.
So began the collapse, and the lack of reaction shows that the markets on the threshold of an even greater collapse. Notice the last time a similar reduction rate was observed in late 2007 — early 2008, and then burst into a terrible financial crisis. Now, it turns out, this situation is repeated.
“SP”: — How fast it will collapse, which in the end will be the state of the global economy?
— It seems to me, the failure to wait long. I think in the coming months there will be a serious slump in all markets. The indexes are still at high enough levels, however, their reduction creates a sensation of falling. What on earth will happen when these indices do fall by 20-30%? Most likely, in this case will roll down.
Moreover, the direct rebound in this situation is not visible. Too many countries are in a bad situation — the same coronavirus in China, in my opinion, covers the global oversupply. Enterprises in this situation are working at the warehouse, and demand for their products has not.
If under the pretext of combating coronavirus, this production ceases, it maybe a long time can not return to previous levels — will not be able to adapt to new conditions. In this situation, the China’s growth rate may fall just dramatically.
Accordingly, in the new situation will have completely different growth rates, corresponding to the new reality and a new level of prices in commodity markets. And especially in emerging markets, which are always the main victims of such disturbances.
“SP”: — What will be in this situation with the ruble?
— As for the ruble, according to the budget rule, fiscal authorities have to enter the market when the price of Urals oil falls below $ 42.4 per barrel. In this case, they are formally obliged to begin to sell the currency you have accumulated. But until then, the currency they are buying — they still do, although the volume of buying is small. I think the authorities will stop buying currency in the near future, if the ruble will create something absolutely wrong.
If the price of oil will drop even more, the Kremlin will have some time — a month or two- to spend the reserves. The authorities just can’t do otherwise: it is necessary to show that the fiscal rule is working, otherwise it will cause a storm of criticism. During this period, the ruble, I think, will be maintained at 70-75 rubles/$.
And then, if they see that the price of oil falls to $ 30 per barrel, and does not rebound above $ 40 — the government will weaken the ruble. And then the possible rate of 80-85 rubles./$ and even up to 100 rubles./$.
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