What will happen to oil and ruble after the Doha summit?

In Soviet times ordinary citizens were not interested in world oil prices, they had enough other concerns, now it became a topic for discussion even among pensioners. The drop in hydrocarbon prices was felt on his wallet by everyone, from billionaires to ordinary workers, who were accustomed to spend vacations in foreign resorts, which had been quite accessible for a long time. With respect to the dollar, the ruble has weakened, and this has upset the broad sections of the population. The reason for the worsening of the economic situation is seen by some in the sanctions imposed by the West after the annexations of the Crimea, but analysts argue that more, and much more, these unpleasant processes are caused by a fall in the price of oil. So what does it depend on and what measures are taken to improve it?

Why did oil become cheaper?

Oil is a commodity, and the price for it depends on the ratio of supply and demand. It has already been proved that there was a statistical error committed by the stockbrokers, and it consisted in overstating the volumes of raw materials for huge quantities. In other words, both producers and buyers thought that oil was much more than it actually was, and it lasted a long time. It would seem, it remains to take into account this distortion of reality, to make amendments, and everything will fall into place. In part, it happened, the price started to rise from the level of $ 29 per barrel, but did not reach the old one hundred plus, stopping at a figure two and a half times smaller, and for that there are reasons. First, such a large-scale market as hydrocarbon is inert because of its size, and secondly, the demand remained rather low, and the proposal grew after the lifting of sanctions from Iran. Countries that produce oil began to think about coordinating efforts, while it should be noted that the position of Russia among them is not the worst.

Oil poker

The mechanism of influence on the price of a species is very simple. If you can not increase demand, and it has stopped because of a decline in business activity around the world, especially in Latin America, then there is only one thing - to freeze production. Despite the textbook of possible stabilization measures, it was more difficult to achieve the result than expected. The price of oil will rise and even inflate if its production decreases, but not in one country, but almost all at once. At the same time, temporary losses are inevitable, during the period when the foreign exchange earnings will decrease. And even if the OPEC countries, by definition, seeking to pursue a consolidated policy, can not agree among themselves, then in conditions where the proposal is also provided by Libya, Iraq, and now also by Iran, such an agreement is very problematic. In this issue, each for himself and wants to "ride at the expense of others." Let someone reduce prey, suffer and under-profit, and each of the countries tries not to lose it and use the fruits of other people's efforts. This went on for a long time, and this game was like poker with its bluff. Saudi Arabia portrayed complete indifference, making it clear that the lower price was also acceptable, and the Americans were pouring out new lots of goods to the market. The question was only in who will last this race longer. Many firms were ruined and out of the game, others reduced production, while others traded in negative territory. Infinitely, this could not continue.

The Iranian problem

In February 2016, the extractive companies of Saudi Arabia, Russia, Venezuela and Qatar finally decided to set a barrier to the growth of the price of oil. For this purpose, a joint preliminary decision was adopted to limit production at the level that took place in January this year. Documentation of this measure should be held on April 17, at the summit of the countries that are the largest suppliers of hydrocarbon raw materials in the world. The main problem preventing the implementation of this measure was still Iran's refusal to support the general consolidated decision, which was attended by a dozen of interested countries. After the working negotiations between the Minister of Energy of Novak and the Minister of Oil of Saudi Arabia, Ali al-Naimi, it was brought to the attention of the world community that the production restriction would be carried out even if Tehran continued to pump oil as much as it wanted.

Participants in the "freeze"

According to Novak, not only fifteen states that have already adopted this decision, but also any others that wish to support the process aimed at raising the price of raw materials, can freeze oil production, which will only be welcomed. At the same time, any coercion or imposition of sanctions by OPEC and other "affiliated" countries is excluded. Diplomatic sources reported that after this statement, Riyadh stopped taking into account Iran's position, although earlier it linked the possibility of freezing production with the policy of that country. Tehran has so far refused to support OPEC and Russia, and it has good reasons for it - for decades the national economy has been exhausted by sanctions, and now it wants very much to reach the former volume of hydrocarbon exports. The extraction in Iran for the month rose from 2.9 million barrels to 3.2.

Combating the Two Trends

The situation with the demand for oil remains extremely difficult, according to OPEC, it currently stands at just 1.2 million barrels per day. Thus, it is difficult to expect that even the Doha summit and its results will significantly affect the market situation, and the price will skyrocket, too much demand lags behind the offer. However, there is still something to be done, especially as, due to a decrease in profitability, American oil production declined, while demand slowly but surely went up. The exchange reacted, the price exceeded the $ 44 mark. Against the trend is an increase in the Iranian and Iraqi supply. Which of the trends will prevail, now it is difficult to predict.

Successes expectations or expectations of success?

World ratings are based not only on specific facts, they depend to a large extent on expectations. The upcoming summit in Doha influenced the Russian indices of the MICEX and RTS, they reached the actual maximum values, unprecedented after the fall of 2008 to the present. Strengthened the ruble against the euro (less than 74 rubles.) And the dollar. The Russian national currency showed high growth rates, the fastest among the developing countries. These positive processes should not, however, provoke overly optimistic moods, they are caused by opportunities, but not yet achievements, so the indices, like the courses, can win back.

Four variants of short-term expert forecasts

The scenario for the upcoming events can develop in different ways, but in reality only four results are possible, and all of them depend on the position of Iran. The most likely (35%) is the opportunity to agree without the support of Tehran, for this there is practically no need to exert efforts. The forecasted result: oil at $ 45 per barrel of "Brent", the dollar at 65 rubles. The second possible option is that Iran supports the summit, but continues to increase production (30% probability). The price of oil will be the same, that is, at $ 45, or even higher, at $ 47, and the ruble will rise to 64 per dollar. The third scenario is possible, the countries at the summit will not agree (probability, according to the forecast of "Sberbank", 20%). This will be bad, the dollar will rise in price to 75-78 rubles, oil will fall again to $ 30, with the most optimistic calculation to 35. In 15%, the probability of the most optimistic option is estimated if Iran accepts the proposed conditions and limits production growth to 2.9 million. bar. in a day. In this case, you can count on a price of $ 47 or even $ 50. The ruble will strengthen to 62-63 rubles.

Long-term expectations

Assuming that the summit in Doha will end with nothing, there are no grounds, otherwise it would be of no use to organize. Analysts of Sberbank assume that, with an expected average result, the price of oil will be $ 42.5 per barrel in the second quarter, 45 in the third, and by the end of the year it will reach 47.5 or 50. Preventing growth will be the revival of production In Argentina, Libya, Brazil and other countries in which the industry is now stagnating. By early 2017, the dollar exchange rate is forecasted to be between 58 and 60 rubles (the chief economist of BCS). Another analyst, Kuzmin (Renaissance Capital), does not agree with him, he expects 65 RUR / USD. Let's see who will be right.