As a result of the lifting of sanctions against Iran by the European Union and the United States dollar and the Euro has updated the highs from December of 2014, rising to 78,936 ruble and up to 85,898 rubles respectively. However, experts expect that the ruble will continue to show relative stability.
MOSCOW, 18 Jan. Dmitry Mayorov. The lifting of the sanctions on Iran by the EU and US will result in short term pressure on oil, but the ruble, although it will be reduced in the region of 80 per dollar, but will continue to show relative stability, experts say.
The decrease of oil to the dollar faster than the ruble against the US currency, Brent is constantly updating multi-year lows and the ruble is already traded cheaper 2,25 thousand.
However, the beginning of the week after the lifting of sanctions to both assets were dramatic. The dollar and the Euro has updated the highs from December of 2014, rising to 78,936 ruble and up to 85,898 rubles respectively. Brent crude oil fell in the area of the lows from December 2003 – below 28 dollars per barrel.
Oil and the ruble in non-rigid bundle
The lifting of the sanctions on Iran, although it was expected and was partially incorporated in the prices of assets, increased tensions on the markets, said mark Goikhman from the company TeleTrade. It is likely that if this decision was postponed, as expected by some market participants, oil prices have time to adjust, and Iran’s output would be less painful, so a verdict for the markets was the surprise, he added.
“But the IAEA has its views, but it is not always financial. And although the authorities of the Islamic Republic has already promised that he will bring to market its 500 thousand barrels a day gradually so as not to put pressure on prices, the fact that events have again brought down the quotes,” said Goikhman.
Technically now is the desire of the oil prices to 25 dollars per barrel, the market is already accustomed themselves to these prospects multiple estimates of market makers and analysts, experts say.
In the short term, the direction of movement in the oil market will be to the downside, says OLE Hansen from Saxo Bank.
“The hedge Fund still owns a record speculative short position on oil futures, and their ranks continue to fill up the players who want to lock in a reasonable (low) prices for the future,” he added.
Several large oil tankers with a capacity of two million barrels each almost completely filled with Iranian oil and ready to ship. This will serve as an additional source of pressure on oil prices in the short term, analysts say.
“However, we can hardly expect that Iran will throw all their reserves into the market and sell it for a pittance. The country has gained access to unfrozen assets worth 50 billion dollars, and to sell oil at $ 25 a barrel without acute need for money makes no sense,” — says Valery Polkhovsky from Forex Club.
“The first impulse, laid down by the decision on the lifting of sanctions, largely implemented, and the turn of 28 dollars per barrel quotes delayed. On further dollar growth target of 80 rubles. However, as with oil, there may be some lag of the growth rate on the reached boundaries 77-78 rubles. Support courses may traditionally have a beginning tax period. The Central Bank is unlikely to intervene in the course of the auction until the quote of 80 rubles per dollar,” said Goikhman.
Highest possible level for the dollar in the short term, a value of about 80 rubles, was rated Igor Zelentsov from the Bank “Globex”.
The Iranian factor
After the lifting of sanctions Iran initially would be able to increase only 100 thousand barrels a day, and only six months later, this figure will reach 400 thousand barrels per day, estimated Hansen from Saxo Bank.
“After many years Iran has been under sanctions and not enough invested in the oil industry, we doubt that the country can just “turn the valve”. It will take more time than I think the market participants, in order to show what she’s capable of,” he said.
There are also factors related to the depreciation of the Iranian oil infrastructure, the need for new contracts in the West, the continuing concerns of Western banks to work with Iran that would hamper the process of recovery of the share of Iran in the oil market, says Dmitry Polevoy from ING.
“The position of the ruble is not critical, given that the 25% reduction of oil since the beginning of the year was accompanied by only 6-7% weakening of the Russian currency. Consequently, the current ruble price of Urals crude remains 20% lower than budgeted, even after the revision, and the average YTD – 12%. This is likely to be further pressure on the ruble, while sales of export proceeds under coming next week taxes can mitigate the decline,” added Field.
Finally, the negative effect from decline of oil is, even for developed countries, which are consumers, not oil producers, because the foreground does not benefit from cheap energy, and the possible negative consequences of this — in particular, deflation, indicating a problem with the economic recovery, said Cole Axon of the company “Sberbank CIB”.