Rocket attack of Iraq on American military bases in the night of 8 November has caused the markets nervous reaction. Indices of Asian countries in the first minutes of trading lost up to 2.6%. Began to fall and the American S&P500, reflecting the value of the 500 largest U.S. companies. This suggests that investors prefer to sell stocks, investing in more stable assets.
Against this background, the demand for gold and, consequently, its price. Since 2013, the price per Troy ounce was higher than $1600. There was a jump in prices of oil: Brent rose by 5% to $71,75 per barrel.
However, this market reaction was short-lived.
After a few hours the price of gold was back to $1595, and oil – $69
Interestingly, this is the second time since the beginning of the year, when Brent crude in time breaks the mark of $ 70 per barrel, but quickly goes back. Such a situation occurred 3-4 January amid uncertainty arose in the middle East.
Trump decided not to fight
The main intrigue for the markets was the US reaction to the attack. The beginning of full-scale hostilities would lead to higher prices for oil and a number of other tools. More mild reaction could turn back the investors ‘ confidence in stocks. Everything depended on Donald trump, or rather from his address to the nation.
The US President, as expected, brought Iran a wave of criticism. In his speech there was a place charged with financing of terrorism and the inadmissibility of its nuclear program, and reminders of the misconduct of Tehran (by the way, not all of them are proven). But the main thing in his speech was the following: the United States will impose sanctions, but no troops.
However, such statements of market participants are not surprised. The United States has repeatedly imposed various sanctions against Iran, some of which have been called “unprecedented.” And Tehran, and its partners gradually learned to get around them. Therefore, once the rhetoric trump was interpreted by many as:
nothing new will happen. And therefore trade on the stock exchanges went into normal mode
The cost of Brent fell to 65.2 dollars – so the oil was a week ago, before the assassination of Qassem Soleimani. Thus, the price of Brent crude has fallen from a peak of 9%. WTI has lost about 10% of the cost was reduced to 59.4 dollars.
What will happen to oil prices?
The theme of confrontation between the USA and Iran, of course, is not closed. The reasons for the continuation of the conflict is on both sides. Tehran also wants to avenge the murder of his General. Trump is not only important to remind you who’s boss, but also to divert attention from impeachment, which he can bear. In addition, in the US presidential elections, so that the image of an external enemy and then can go to the acting head of the White house favor. This means that the oil market could still shake things up, reacting to the conflict between the two countries.
However, while in the oil market reigns customary surplus. According to the International energy Agency, in the first quarter of 2020, oil production will exceed global demand by 700 thousand barrels per day. This is despite the extension of the deal, OPEC and Saudi Arabia’s decision to reduce production by an additional 400 thousand barrels per day.
This may result in production growth outside OPEC. Oil company in 2019 invested in new projects of more than $200 billion, and this will lead to the fact that in the market where supply exceeds demand, there will be millions of tons of new oil. Assessment Rystad Energy, the United States will increase production by 1.1 million barrels per day. 527 thousand barrels adds Norway, 244 thousand Canada.
Brazil’s Petrobras a few years ago was on the verge of defaulting, but today, experts are increasingly talking about the fact that by the end of 20 years, the company will be able to overtake Saudi Aramco in terms of production. In 2020, volume is projected to grow by 459 thousand barrels per day.
In addition, this year the market a new exporter Guyana. Here was discovered a gigantic oil reserves (estimated at 5.5 billion barrels). In 2020 there will first start industrial oil production, the volume of which at this stage can reach up to 100 thousand barrels per day.
In sum, non-OPEC countries will increase production at 2.26 million barrels per day, Rystad estimates.
The real price of the exchange below
The price of oil on the stock exchange and its real value in the transactions may differ significantly. And a similar situation is now observed more often. According finanz.EN, a little more than a month, the price of Russian oil Urals in Europe relative to Brent fell to the lowest level since the end of 2015. If in the last week of November every barrel of Russian export grade cost on average 25-40 cents more expensive than Brent, then by early January, sellers have had to give discounts of up to $ 3.5 or more.
Thus, for five weeks of physical oil from Russia to Europe fell by 4.1 per dollar. As a result, the rise in prices in the futures market (from 62 to 69 dollars) was 60% paper illusion, not affecting actual delivery.
6 January another discount for its customers suggested Saudi Arabia
They said that the party with the shipment in February will drop by 1.6- $ 2.5 for Western Europe and 2.5-3.5 dollars for the Mediterranean countries. This means that in some countries the price will be $ 4 less than the current cost of Brent.
All these factors hamper the growth of oil prices, but that it now was high, it seems that few people are interested. On 8 January the Minister of energy of the UAE Suhail al-Mazrui said that no one wants oil prices at $ 100 per barrel.
How does the tenge
The jump in oil prices could not affect the rate of the Kazakh currency. The official value of the dollar on 9 January was 378,21 tenge – at least June 2018. Only in recent days the tenge has strengthened by 2.99 tenge, which is a record for the last 7 and a half months.
Even more a day lost in the price of the Euro rate fell by 5.39 tenge. This was the sharpest decline since January 2018. The official cost of the European currency on January 9 amounted to KZT 421,25. Reduced and the ruble. If in the new year, the Russian currency was included with the cost of 6.16 tenge, now its price on 5 tiyn less.
Interestingly, the dynamics of the national currency wasn’t even affected by the drop in oil prices. As of 11: 30 a.m. January 9, the dollar is trading on the Kazakhstan stock exchange at 376,5 tenge. Thus, our currency by this time was strengthened by another 1.7 tenge.