RUB: oil lubricates slipway of decline
Yesterday, RUB slipped another 3.2% against USD to close at 48.60. As we suggested, downward pressure on crude meant visible negative sentiment for RUB and other commodity-based currencies. In particular, NOK declined 1.20% as Brent fell 6.1% to USD 71.7/bbl. OPEC refrained from cutting oil production, leaving its output target at 30mmb/d. More disappointing was the absence of a commitment to adhere to the 30mmb/d ceiling (7 months out of 10 this year have been above 30mmb/d). Overall, we believe that the meeting puts the risks for Brent on the downside. It is likely to scratch USD 70/bbl and perhaps overshoot even lower on fund flows and technicals. The next scheduled OPEC meeting is in June 2015. As we wrote yesterday, at an average price for Urals of USD 70/bbl, we estimate the fair USDRUB level at 47.00 for the next year. Therefore, yesterday’s RUB drop has more legs amid a negative outlook on crude. Separately, we again highlight the fragility of the Russian FX market: in the middle of yesterday’s session, USDRUB dropped near 50 kopeks from 47.50 to 47.00 in a matter of minutes without any particular news or triggers. High RUB volatility barely surprises anyone these days, but the price move was triggered with just a USD 250mn offering ticket. For couple of hours, USDRUB even traded a little below 47.00 before OPEC’s meeting. Overall, yesterday’s USDRUB turnover on the MICEX was USD 5.6bn.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst
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