The price of Brent oil rose above $105 per barrel on April 23, and at the end of trading the price was $102.5. The Strait of Hormuz, through which up to 20% of oil enters the market, essentially remains closed due to the cessation of negotiations between Washington and Tehran. In addition, last week a drop in petroleum product inventories was recorded in the United States. Despite rising oil prices, the ruble weakened due to the Ministry of Finance’s decision to begin purchasing foreign currency in May as part of the fiscal rule.
At the beginning of the day on April 23, the cost of the nearest contract for the supply of Brent oil on the ICE exchange reached $105.8, which was 3.8% higher than Wednesday’s closing value. As a result of trading, prices stopped at $102.5 per barrel, having increased by 13.4% since the beginning of the week. Thus, prices returned to the levels at which they were immediately after US President Donald Trump announced a suspension of strikes on Iran for two weeks in exchange for the opening of the Strait of Hormuz.
The price recovery comes as shipping restrictions in the Strait of Hormuz remain. According to the analytical company Euler, from April 21 to 22, only three ships left the Persian Gulf: an Iranian oil tanker, a product tanker and an LPG gas carrier. At the same time, three ships also crossed the Strait of Hormuz from east to west: two oil tankers and one product tanker. “Over the past 24 hours, we have not recorded any new departures from Saudi Arabia’s terminals in the Red Sea. At the same time, one tanker with 0.1 million tons of oil on board left the UAE port in the Gulf of Oman,” the Euler report notes.
Against this backdrop, the stalled U.S.-Iran talks and Tehran’s seizure of two vessels have only fueled fears that shipping disruptions in the Strait of Hormuz will continue, and the optimism of two weeks ago was excessive. An additional factor in the rise in oil prices was the latest statistics on petroleum products in the United States. According to the Ministry of Energy, gasoline inventories fell by 4.57 million barrels over the past week, and distillates by 3.43 million barrels.
However, as investment banker Ilya Sushkov notes, the market does not yet believe in a long-term physical drop in volumes.
The expectation remains that possible disruptions will be partially offset by strategic reserves and redirection of flows.
This limits growth potential and prevents prices from rising to the highs set in late March and early April. In the base scenario, the expert expects oil prices to return to the range of $85–100 per barrel over the next week. “A sustainable rise above the level of $100 per barrel is possible only with a real escalation with a physical disruption of supplies. Otherwise, the market will gradually “blow away” the geopolitical premium and return closer to fundamentally justified levels,” says Mr. Sushkov.
The recovery in oil prices had a limited impact on the Russian market. The Moscow Exchange index grew by only 0.4%, exceeding 2771 points. During the morning session, the exchange rate of the yuan dropped by 4 kopecks, to 10.91 rubles/CNY, but by noon it returned to the closing levels of the previous day. As a result of trading, it rose to 11.07 rubles/CNY, adding 12 kopecks during the day. Thus, the market reacted to the decision of the Ministry of Finance to begin operations within the framework of the fiscal rule in May. According to Sovcombank chief analyst Mikhail Vasiliev, currency purchases from May 8 to June 5 will amount to 300–400 billion rubles. However, the position of the Russian currency will remain strong in the coming weeks: the dollar exchange rate will remain within 73–78 rubles/$, the yuan exchange rate will remain 10.7–11.4 rubles/CNY. “Until April 28, the ruble will be helped by the April tax period – exporters will be more active in selling foreign currency earnings for settlements with the budget,” explains Mr. Vasiliev.
