The evening of August 1 the price of oil fell sharply. The reason — the President of the United States Donald trump promised from September 1 to introduce a new fee at the rate of 10% on imported goods from China worth $ 300 billion. About this he wrote on Twitter.
The new duties will affect goods for which they have not been entered yet, said trump. He also recalled that in respect of Chinese products by $ 250 billion already operate fee at the rate of 25%.
The market reacted to trump’s words instantly. By nine in the evening Moscow time, a barrel of Brent on the Intercontinental exchange fell by 7.7% – to $ 60,42. At this point, the cost of WTI crude oil during trading on the new York stock market fell by 7.39% to $ 54,25 per barrel.
Then began to fall and the ruble exchange rate. By the evening of Thursday, the dollar rose by 60 cents to of 64.23 rubles, Euro 64 kopecks — up to 71.14 rubles.
Such a sharp reaction is quite understandable. The new duties are guaranteed to complicate the negotiations, the U.S.-China. A new round of trade war increases the risks of a global recession, and could hurt demand for oil.
In fact, coming true negative forecasts of analysts.
We will remind, in June the world Bank lowered its estimates for global growth to 2.6% (previous year growth amounted to 3%). It is expected that in the group of advanced economies, especially in the Eurozone, economic growth in 2019 will slow down due to weaker exports and investment. The pace of recovery of the US economy this year is forecast to fall to 2.5%, and in 2020 to 1.7%.
In addition, on 23 July, the international monetary Fund (IMF) downgraded its forecast for global GDP growth in 2019 by 0.1%. The estimate of growth of the Russian economy in 2019 was reduced by 0.4% to 1.2% of GDP.
For Russia “tweet” trump’s doubly bad news. Moreover, the demand for oil will fall. So more oil on the market will increase due to the fact that the US is actively increasing production and exports.
Assessment Rystad Energy, until the end of 2021 the capacity of the pipelines transporting oil from the largest oil shale of the Permian basin will grow threefold. As a result, ports of the US East coast will flood up to 4 million barrels per day.
Two major Texas port of Corpus Christi and Freeport will be reconfigured under-oil exports. The terminal is in the first building trader Trafigura, the second — Enterprise Products Partners.
As a result, one only Permian will be able to increase production by half in six years — from 4 to 8 million barrels per day. By that time, according to the forecast of the International energy Agency, total liquids production in the US will reach 18 million barrels per day, while exports could exceed 5 million
All this means that shale oil will set a new benchmark price — $ 35-40 per barrel.
The ruble at such values, it is not excluded, deflate to 80 rubles per dollar.
Now back to the prospects of Russia. As you know, our country is dependent on the oil market, and does nothing to weaken this dependence. According to some experts, it may be more hostile to us in the West. They can take advantage of the situation the “perfect storm” in the global economy, as much as possible to complicate Moscow life. And unlikely to fluctuate, if you need to throw out Russia from the oil market. For us it is a serious geopolitical risk.
— Statements of trump is always news that significantly affect investor sentiment, — the leading expert of the Center for political technologies, an economist Nikita Maslennikov. But you have to understand: the American President makes them, when the situation is ripe. So the decisions trump should be considered in the context of trends that developed earlier.
In the past week, several events occurred that changed the picture in world markets, and given the new change of global risks.
First of all, it is the decision of the U.S. Federal reserve for the first time in 10 years — to reduce the base rate from 2.25−2.5% to 2-2. 25 percent. The players are such decisions expected but they waited for the press release of the fed and a press conference with fed chief George Powell. And this time the players felt disappointed. The fed did not give a clear signal that starts the cycle of quantitative easing. The decision to reduce rates was filed as a single measure associated largely with political pressure from the White house.
In the end, the markets read these explanations is clear: in the global economy increases uncertainty. This frustration led to the current reaction — the reverse of the previous situations, when the rate decreased. Traditionally in such cases, remember, the dollar began to weaken, and oil — to rise.
Now the dollar is strengthening — on the Moscow stock exchange it has reached the mark of 64.5 ruble. Oil falls, following the strengthening of the dollar and the stock markets go down.
“SP”: — What factors, in addition to the fed’s decision affect the current situation?
— The slowdown of the global economy. In the first quarter the growth amounted to 0.4% now to 0.2%. As a result, in annual terms, the global economy has slowed from 1.2% to 1.1% of GDP.
Immediately the government of Japan changed downward by 0.4 percent – the forecast for the next year. And in China, a meeting of the political Bureau of the CPC Central Committee, where it was said: the economy is experiencing unprecedented pressure. The second quarter of China finished with a pace of 6.2% of GDP — the worst in 27 years. Notice the problems in the Chinese economy a lot — last year 18 thousand enterprises have declared bankruptcy, which is twice more than in 2017.
In short, the fed’s decision not break the feeling of impending crisis.
“SP”: — now What will happen to the ruble?
— The fed slammed on the Russian currency. This also added two new factors. The first — trump the signing of the decree of the second wave of sanctions against Russia in connection with the case Skrobala. The details are still unknown, but by itself the news is about strengthening sanctions pressure always runs on the depreciation of the ruble.
The second factor is oil prices. Americans, I think, changed tactics against Iran, and become more relaxed to Express their grievances. In the end, the passions about the inevitable tightening between the US and Iran, was asleep. And oil prices immediately began to decline.
Finally, oil was added to the fire “tweet” trump’s new tariffs on Chinese goods mean that prospects for global growth deteriorates further.
All of this combined — short track — works in the direction of reducing the ruble exchange rate.
“SP”: — You say, on a short track. There are hopes that the situation will change?
— Hope really is. In September, the European Central Bank is likely to ease monetary policy — a new positive stimulus of a global nature.
The second factor is China will soon declare the start of the program of quantitative easing with a validity of six months.
In addition, at the end of August will be held a Symposium under the auspices of the fed, which brings together leading analysts, bankers and regulators. It will be clear, where is the world economy.
In the end, barring catastrophe, markets will calm down and the ruble, perhaps even a little stronger.
— Russia’s role in the global economy is secondary, and even tertiary, — the President of the Union of entrepreneurs and tenants of Russia Andrei Bunich. — The Russian economy is a derivative of the “bubble” in emerging markets and related commodities. Developed countries by definition don’t need any more raw materials: the energy conservation and efficiency — long trends.
Russia is developing in the framework of the growth of large periphery. Now the periphery is falling off, and you’re on your own. So a quiet life for us is over.
In addition, we have a personal problem. Lately Russia has become the main enemy of the collective West. This gives the situation a special mark, because it means a second cold war, and the huge cost of maintaining defensive balance. Plus a new painful sanctions and strikes.
This is our fundamental difference from other countries-energy suppliers — the same Saudi Arabia. The West can Riyadh to help us to help will not be exact.
Notice Russia over the last few years I had to give the collective West about $ 300 billion, and further capital inflows will not.
In short, a new crisis Russia will have hard times. It is no coincidence that the head of the accounts chamber Alexey Kudrin said that we will be able to withstand only the first wave of the crisis. After that, reserves will remain.