16.07 - attention turned to USA-Russia summit
Oil prices march down with output uncertainties and Russia may soon lend itself in hot water again.
Prices for oil are notably down this trading morning and there is a reason behind the major names in the crude industry to go down – oversupply of one of the customers of Saudi Arabia. They say that the country offered more to one of the buyers amidst plans to boost the output. Today it is a perfect possibility to see what oversupply does to the markets. So why is output increase still on the table?
Talks and concerns about the output have helped oil go higher last week but it does the exact opposite for the crude today. News that one of the crude producers [Libya] has resumed output from one of the biggest oil fields in the country have only become the reason for the selloff. Industry is also awaiting the meeting of American and Russian presidents as it is expected that they will also talk about the oil output among other things. With possible output numbers change again, the selloff is likely to go on into the rest of the week which threatens to take the prices per barrel of the crude even lower now.
Our focus is now on the output increase once again. We fear that is the output numbers go up once again, the market will go down hard. With all of the major producers in the market fighting for the prices for their own brand of the crude there are not so many people who think what it can eventually do to the markets, everyone is hoping that their particular crude is going to gain percentage and points, crawling up in the price, but that is really not likely to happen. Oversupply of the market will do the exact opposite to the prices – it will kill the demand and mess with traders.
We can only guess what the markets will do further with this unpredictable crude but the interesting thing about the asset is that it is not the behavior of it which is unpredictable. It is international policies that can easily change the price rates. And right now the policies towards this segment of the ,arket are one of the most uncertain and unpredictable. Do you know what happens when every player is playing for himself? There is no good game and there are not many winners left at the end. That is exactly what can happen here.
American investigators of meddling in the 2016 presidential elections have issued the report that included 12 names of Russian special service workers who have allegedly been taking part in meddling into American elections. Extradition request was already sent to Russia.
New poisoning of two people with Russia gas Novichok was noticed two weeks ago in Great Britain. About two month ago a former Russia spy, who fled to the UK and his daughter were also subjected to poisoning with the said gas. Now the new poisoning brings UK special forces to the question, where the next attack is going to happen.
With excellent never-seen-before performance of Russian national team at the Football World Cup we can't help but remember the scandal which took place right after the Winter Olympics of 2014 when Russian athletes were accused of taking performance enhancing chemical and then swapping the test results. Has the same happened this time?
All of the question and topics that we touched are here for a reason. Is Russian economy going to crash even lower now? Is this why Russia-America summit happening only one day after the world cup is over? Is the biggest country in the world going to show new levels of aggression somewhere in the neighboring country? If that really is the plan of the Russia government than we have to be prepared for the new performance of the markets very soon as we are going to see new numbers of Russian ruble exchange rate.
Last time Russia was stirring up the situation in the world Ruble went from 30 rubles per dollar to nearly 80 rubles per dollar. Now the situation is more stable with exchange rate being somewhere around 65 rubles per dollar but we all know how fast everything can go awry. Russia is a big player in the world and Moscow exchange is the main own for traders in the region. Moreover, with Russia ruble almost twice as weak as it used to be 4 years ago, a lot of productions and small businesses will not withstand the losses. There will also be losses for the big state companies like Gazprom and Rosneft which supply the whole Europe with natural gas and ship oil around the world. And this already messes with world prices for the raw crudes.
All we want to say that is Russia gets under more sanctions with it deeds the whole world will be in serious trouble. By the way, with all the talks about China and USA trade tension we are forgetting that even if the country doesn’t have the economy as strong as these two countries it doesn’t mean that the troubles inside its markets will not rupture the balance in the world.
So, in case there is more restrictions and sanctions on the worlds markets, we know what consequence to await – just chaos. But for now it is business as usual.
- by Anna K.