THE RUSSIAN RUBLE COLLAPSED TOGETHER WITH THE OIL PRICE: IS THE BLACK TUESDAY TO COME?

The trading week has started with the great collapse. The oil prices were the first to collapse, and the next was the ruble. It all happened despite the fact that there was no trading on the Moscow exchange market that day: there was an official day off in Russia. What should we expect on Tuesday, after the trading starts?

We should remind that at the close of trading before the weekend, the dollar already reached the point of at 68.5 rubles, and the euro was almost 80 rubles. The currency course stayed overpriced for several days.

On Monday, the dollar was already more than 74 rubles, and the European currency’s cost valued at the point of almost 85 rubles. And this, apparently, is not the limit, considering the fact that the cost of Brent crude oil collapsed by a quarter, and then by a third altogether.

The experts call the current decline in the oil’s value (less than $ 34 per barrel) the strongest since the collapse of the Soviet Union.

To put it in simple words, everyone expects the coming Tuesday to be black for Russian traders. What is going to happen to the domestic assets, starting with the currency and ending with the value of shares and debt instruments?

To answer this question, it is necessary to understand the reasons for what happened. The first and obvious reason is the OPEC countries and Russia (OPEC +) negotiations on the issue of reducing the oil production. The current restrictions will cease to apply from April, 1. Each oil producer will independently decide, whether to increase the volumes or not. It is not clear, whether Russian companies will do this or not. It all depends on the profitability of the oil production and the actions of competitors in the world market.

Saudi Arabia actually entered a price war, announcing its intention to increase oil production.

“Saudi Aramco” (a state-owned company) announces maximum discounts over the past few decades, while its shares on the stock exchange dropped in price below the IPO.

What is going to happen on March, 10? The Central Bank has already stopped buying foreign currencies on the domestic market a month before and, of course, uses all the reserves to ensure financial stability. The Ministry of Finance will get rid of the currencies in order to ensure the budget expenditures.

A number of experts indicate that the current fall is the result of a well-thought-out policy of the Russian state. In fact, having destroyed OPEC + and collapsing oil prices, Russia could start a “survival war", eliminating weaker competitors. After all, the budget of the Russian Federation is balanced better than in the UAE or Angola.

Will Russia have enough accumulated means of the NWF in this case? Or will the Russians have to “tighten their belts” again?

An additional factor in the current situation was fear and uncertainty. The inelasticity of the global hydrocarbon market could lead to the more negative development of events. Considering the fact that breaking the agreement with OPEC and falling oil prices could seriously hit North American shale oil suppliers, the scenario of a well-thought-out policy of the Russian Federation on the world market no longer seems as absurd as it might seem at first glance.