15.10.2020: Oil has slim chance of rising above $45 (Brent, USD/RUB)

Brent crude moved above 43 dollars per barrel despite the lack of short-term supporting factors. The industry data from the US helped lift the prices. Meanwhile, the US dollar advanced against the ruble approaching the 80 mark even though the background remained stable.
On Wednesday, crude oil prices jumped by 2% at the end of the trade supported by the US industry data on crude stockpiles. However, today oil moved lower, losing its gains from the previous session. The American Petroleum Institute reported a considerable drop in oil inventories by 5.4 million barrels.
Oil market is rising for a second day in a row despite a resurgence in coronavirus cases in Europe that potentially threatens fuel demand. It seems that the energy market is now following its own trajectory. Besides, the recent volatility in oil prices may have attracted more traders.
In the mid-session, Brent oil futures with the nearest expiration dropped by almost 1%. Oil bulls failed to hold at 43 dollars per barrel. So, Brent slipped below this mark at midday. WTI crude is trading in a similar way, having settled above 40 dollars per barrel.
Despite a correctional decline, the oil market has good prospects for growth. First of all, investors were encouraged by the World Energy Outlook from the International Energy Agency. Even amid the second wave of Covid-19, global oil demand is expected to recover by 5.5 million barrels in 2021. In addition, the OPEC+ compliance with the agreement on output cuts reached 103% in September. Market participants also hope that the alliance will consider further production cuts.
The weakening US dollar serves as another bullish factor for oil. This makes it possible for Brent to break above 45 dollars per barrel.
In the meantime, the ruble declined amid new EU sanctions against Russia in response to Navalny’s poisoning. The EU officials have approved new restrictive measures, including travel bans and assets freezing in the EU countries. What is more, the demand for risk assets decreased after the US company suspended the trial of the coronavirus vaccine. Finally, the economic stimulus package in the US has been postponed until after the election, thus adding to the market pessimism.
The ruble will most likely stay under pressure for the rest of the week unless positive news from the US about the fiscal stimulus or coronavirus vaccine help it rebound.
Today, the dollar/ruble pair continues to rise, having gained almost 0.5% in the day trade. The trading range remains largely unchanged, with the pair holding in the area between 76.50 and 79.30. So, the possibility of the ruble falling below the level of 80 is rather low. Even if the background worsens, the price is expected to stay within the current channel.
The ruble bulls are losing ground. However, if oil shows steady growth, the US dollar may well retreat to the mark of 75.


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