Bets of hedge funds on the strengthening of the ruble was close to the annual maximum

Hedge funds have increased bets on the appreciation of the ruble against the dollar almost reached the annual peak — the last time the number was as high as 31 March 2015, according to the United Nations Commission on trade commodity futures (CFTC). The price of Brent crude oil since the beginning of March increased by 10% and peaked around $40 per barrel (at 17:40 GMT, the benchmark traded at $39,15), and investors are again interested in emerging markets.

Against this background, the ruble since the beginning of the month has strengthened by 6.5%, showing the maximum growth since April last year. 17:40 Moscow time the dollar bargained at the level 70,77 RUB.

This year, large speculators have begun for the first time to increase investments in the ruble in mid-January. For the week ending January 19, the number of net long positions on the ruble amounted to 657 of futures contracts compared to 651 the contract for the previous five trading days.

“Most likely, this is profit taking after a huge decline, not a change in sentiment, said then foreign exchange strategist at Barclays Juan Prada. — The ruble is highly dependent on oil prices, and in the case of reduction in price of oil, against the ruble may become negative”.

19 January — the eighth consecutive week large speculators enlarged their positions on the ruble. For the week ended March 8, the number of net long positions on the ruble amounted 2601 futures contract against 1842 contracts over the previous five trading days. Since the beginning of year on 8 March, the ruble gained against the dollar by 5.2%, registering the third-best performer among emerging market currencies, Bloomberg reported. The Russian currency “is under the influence of oil prices and negotiations with OPEC, at least until mid-March,” explained the Agency in late February, the analyst Nordea Bank Denys Davydov. “The rouble has every chance to add 5% if the price of oil will resume its growth and will exceed $35 per barrel.”, — he considers. “If oil prices rise to $40, the ruble could strengthen to 70 rubles per dollar, which was last observed in December, said the Agency managing asset management company “Opening” Dmitry Kosmodemyanskoy. 120-day correlation between the Brent price and the ruble reached on Monday, March 14, 0.76 (unit would mean that the assets are perfectly correlated).

1 to March 8 there was also a record rate of elimination bets hedge funds and other speculative investors for cheaper American oil. Their short positions in options and futures for oil WTI at stock exchange NYMEX have decreased on 38 232 of the contract, or 25%, according to the CFTC data. Reduction of short positions on the 38.2 thousand — a record since 2006, when statistics starts. The previous record was recorded in April of 2015, when the week was closed 35 thousand short positions. Rates on cheaper WTI down for the fifth consecutive week, during this time, the number of short speculative positions decreased by 43%, according to data from CFTC, WTI crude oil, respectively, rose by 22% (to 8 March).

In conditions of excess supply oil prices in the range of $25-45, follows from published on 14 March review of Adam Longson and other analysts at Morgan Stanley. Hedging of producers, the dynamics of commercial stocks may limit the rising cost of crude oil WTI in the range of $40-45/bbl., waiting for Morgan Stanley. Today its forecast for Russia has released economist of the Bank Alina Slyusarchuk. According to the Bank’s forecast, the deficit of the Russian Federal budget in 2016 will be 4.2% of GDP, if the average price of Urals oil will be $34 per barrel. If the average price of Urals crude oil will be $40 in 2017, Russia’s GDP will grow by 0.9%, while inflation will decelerate to 6.7%.

Balancing the oil market may be delayed if the current prices remain at current levels, follows from published on 14 March review of Kevin Norrish and other analysts at Barclays. If the increase in oil prices will slow the rate of decline of production, unfavourable market conditions may persist. Technically now oil prices indicate that the market has established upward trend, says the review. According to analysts at Barclays, the observed situation resembles the scenario of last year, when prices rose about 20% in January–February due to the significant reduction in drilling in the United States. In these circumstances, market participants concluded that the worst was over, when “actually, it was just beginning”.