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FX.co ★ 05.03.2021: OPEC+ decision sends oil skyrocketing (Brent, USD/RUB).

05.03.2021: OPEC+ decision sends oil skyrocketing (Brent, USD/RUB).

Oil bulls are rapidly pushing the price to new record highs. The ruble takes a break after a sharp drop yesterday which was caused by Jerome Powell’s speech. The sanctions against Russia also weigh on the ruble. Saudi Arabia agreed to extend its voluntary cuts of 1 million barrels per day for one more month. The oil officials have suddenly decided not to increase oil production. Notably, Russia was granted a small exemption from the curbs. It can now increase its output from April by 130,000 barrels per day. Investors were cheered by the news from the OPEC+ and sent the quotes to new yearly highs. On Thursday, both contracts surged by more than 4% right after the meeting. Today, oil was up by 1.5% but then accelerated the pace of growth. Brent contract with the nearest expiration moved above 68 dollars a barrel, while WTI futures for April tested the level of 65 dollars a barrel. The bullish trend will most likely intensify following the decision of the alliance. The next upward target for Brent is the mark of 70 dollars a barrel, while WTI crude may jump to 66 dollars a barrel. Despite the stunning rally, the scenario of a correctional decline may still be relevant for oil. It may start later in two or three weeks when markets will fully digest the positive news from OPEC. In the meantime, oil futures with the later expiration are trading lower than the nearest ones. At the moment, oil is getting support only from the OPEC+ decisions. The risk sentiment has worsened and the wave of sell-offs returned to the global markets. Investors are worried about inflation risks that may lead to a rate hike by the US Federal Reserve. Yesterday, Jerome Powell tried to reassure the markets saying that he currently sees no reasons for changing the monetary policy. However, investors seem to have downplayed his words. The ruble looks weak today, but its losses will be capped by a record increase in oil prices.

Lower risk appetite is not the only reason for the ruble’s weakness. Yesterday, it came under pressure from more geopolitical risks. It was reported that the US and the UK are planning to impose news sanctions that may hit the Russian debt market. Against this backdrop, the dollar/ruble pair slipped to the level of 75. On Friday, there was a slight pullback so that the US dollar moved below the mark of 74 rubles 50 kopecks.

If the ruble manages to hold at this level and settles above the resistance of 74.70, its next target will become the area of 76 against the greenback. However, this scenario is very unlikely since the pair needs more negative factors to move to this level. More details about sanctions will extend the ruble’s weakness. Besides, the start of a correction in the energy market may serve as another bearish factor for the Russian currency. If oil stays at comfortable levels this year, the ruble may easily advance to the levels of 67 and 65 against the US dollar. The current forecast for spring suggests that the dollar/ruble pair will not move higher than the 75 mark. The threat of sanctions is becoming more serious as they will drastically change the situation for the ruble. However, this is an extreme measure that will probably take some time before coming into force. So far, these threats have the nature of verbal interventions. However, the sanctions rhetoric will continue to have a negative impact on the ruble.

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