FX.co ★ 03.12.2020: Oil may drop to $45 as OPEC resumes talks (Brent, USD/RUB).

Oil has returned to recent highs. Its further dynamic will depend on the OPEC+ decision on output cuts. Meanwhile, the ruble is about to break through the level of 75 against the US dollar. The short-term background is favorable for the Russian currency.

On Wednesday, the members of the alliance made some progress in negotiations over the deal which helped Brent to rise above 48 dollars per barrel. Even the bearish data from the US Energy Department could not offset investors’ optimism. The report showed a smaller decrease in oil stockpiles compared to analysts’ forecasts. Still, crude prices edged higher on an overall positive background. Besides, the indicator turned out to be better than the API predicted yesterday.

Today, Brent oil futures are trading above 48 dollars per barrel, moving steadily higher. WTI crude also returned to the previous highs. The futures contract with the nearest expiration settled above 45 dollars per barrel. Despite optimistic sentiment in the market, oil quotes are still holding in the previous price range. A noticeable shift will happen only when the OPEC+ announces its final decision. The extension of the current deal on production cuts will be a positive scenario for oil prices.

Earlier, the OPEC+ meeting was delayed until December 3 after the members failed to reach a consensus. This news raised worries among market participants. At the moment, optimistic sentiment prevails, and traders hope for a positive outcome. However, the risk of disagreement is still high. It is possible that the grouping will decide to lift the supply restrictions starting from January 1. At the moment, oil prices are in a better position than in April which means there is no need for additional support.

In this case, the sell-off on oil may resume. The fuel demand is still weak given the new lockdowns and a resurgence in coronavirus cases. So, Brent remains at risk of falling to 45 dollars per barrel.

The ruble opened the day with a moderate decline against its American rival. In general, the Russian currency is holding steady at comfortable levels. On Thursday, it reached a record high in two and a half months supported by the overall optimism. Market participants continue to factor in the news about fiscal stimulus measures in the US. In addition, the UK authorities have approved the emergency use of the American vaccine. The vaccination program will start as soon as next week.

The dollar/ruble pair has approached the level of 75. Although the background is favorable for the ruble, traders may still prefer the foreign currency. However, the outcome of the OPEC+ meeting may bring some changes to the ruble’s direction. It has a good chance of advancing to 74 against the US dollar if the alliance extends the deal.

In case of a pullback in oil, the ruble will face a wave of sell-off. Then, the greenback may attempt to win back some of its losses and return to the 76 area. This scenario may also happen if investors decide to take profit on short positions on the US dollar.

In the medium term, the ruble has good prospects for an uptrend. The dollar/ruble pair may well retreat to the level of 72.50 and below in the first six months of the year.

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