GBP/INR cannot stop its rally that seems to be endless.
Pound versus Indian Rupee rate is currently trading at 97.192, up 0.68% as of 6:05 AM UTC, touching the highest level since October 2018. This is the sixth bullish session in a row.
The rupee has suddenly tumbled after oil markets have crashed, losing over 30% after the OPEC+ alliance broke up, with Saudi Arabia and Russia finding themselves in the middle of a price war. Brent futures saw the second-biggest decline in history, behind the crash in 1991 during the Gulf War. Now WTI is trading below $30 per barrel while Brent futures are fluctuating at around $33.
Goldman Sachs warned that prices might continue to decline to $20 a barrel. The bank said:
“The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus.”
The crash has hit oil-dependent and trade-reliant economies. While India doesn’t rely on production, its already weakening economy will be heavily affected by global trade disruptions.
The crisis started with the coronavirus outbreak, which hit the global oil demand. OPEC+ countries discussed whether they had to deepen the production cuts, but Russia didn’t want to lower oil exports. In response, Saudi Arabia decided to retaliate and increase oil output above 10 million barrels per day in April, after the current deal to cut production expires at the end of the month.
Thus, the OPEC+ alliance, which has been around for over three years, has disintegrated. Now OPEC countries are separating from Russia and other oil producing countries.
Jonathan Barratt of Probis Securities commented:
“I think all forecasts are out the window. It seems like a race to the bottom to secure order(s).”
Besides the increase of oil production, economists fear that oil demand will decline this year as a result of the coronavirus epidemic.
Ed Morse, head of commodities research at Citigroup, said:
“This is the first time I can recall that there has been a significant oversupply crunch and demand shock at the same time. The combination is really unusual and makes it more difficult to see how you work your way out of it.”
