impact of oil prices crunch on currencies

Impact of Oil Prices on Currency

ITM - Batch 34 (Finance)_MNCF_Group 3

Oil Prices/Per Barrel

2008

150

2007

6540

2015

Group MembersTheresa TumkurPrashant MirguleRinki HaldarShital PawarKarunakar NiwateShahezad Sakharkar


Objective: To gain insight into risk factors impacting valuation of currency

To illustrate this we have tried to correlate the recent price fall in oil and other commodities with valuation of few currencies vis-à-vis USD

Below is the list of currencies

Sr. no. Country / Currency Impact

1 Russia/Rouble Oil2 Norway/Norwegian Krone Oil3 Canada /Canadian Dollar Oil & Metals4 Australia / Australian Dollars Metals & Oil


Current OutlookITM - Batch 34 (Finance)_MNCF_Group 3

3-Jan

-14

29-Ja

n-14

24-Fe

b-14

22-Mar-

14

17-Ap

r-14

13-May-

14

8-Jun

-14

4-Jul-

14

30-Ju

l-14

25-Au

g-14

20-Se

p-14

16-Oct-

14

11-Nov-

14

7-Dec-

14

2-Jan

-15

28-Ja

n-15

23-Fe

b-15

21-Mar-

15

16-Ap

r-15

12-May-

15

7-Jun

-15

3-Jul-

15

29-Ju

l-15

24-Au

g-15

020406080

100120 0

2

4

6

8

Krone

Crude Krone (RHS)

3-Jan

-14

28-Ja

n-14

22-Fe

b-14

19-Mar-

14

13-Ap

r-14

8-May-

14

2-Jun

-14

27-Ju

n-14

22-Ju

l-14

16-Au

g-14

10-Se

p-14

5-Oct-

14

30-Oct-

14

24-Nov-

14

19-Dec-

14

13-Ja

n-15

7-Feb

-15

4-Mar-

15

29-Mar-

15

23-Ap

r-15

18-May-

15

12-Ju

n-15

7-Jul-1

5

1-Aug

-150

20406080

100120 0

0.20.40.60.811.21.4

Canadian Dollar

Crude Canadian Dollar (RHS)

3-Jan

-14

29-Ja

n-14

24-Fe

b-14

22-Mar-

14

17-Ap

r-14

13-May-

14

8-Jun

-14

4-Jul-

14

30-Ju

l-14

25-Au

g-14

20-Sep

-14

16-Oct-

14

11-Nov-

14

7-Dec-

14

2-Jan

-15

28-Ja

n-15

23-Fe

b-15

21-Mar-

15

16-Ap

r-15

12-May-

15

7-Jun

-15

3-Jul-

15

29-Ju

l-15

24-Au

g-15

020406080

100120 0

1020304050607080

Rouble

Crude Rouble (RHS)

Source: Bloomberg

2-Jan

-14

28-Ja

n-14

23-Fe

b-14

21-Mar-

14

16-Ap

r-14

12-May-

14

7-Jun

-14

3-Jul-

14

29-Ju

l-14

24-Au

g-14

19-Se

p-14

15-Oct-

14

10-Nov-

14

6-Dec-

14

1-Jan

-15

27-Ja

n-15

22-Fe

b-15

20-Mar-

15

15-Ap

r-15

11-May-

15

6-Jun

-15

2-Jul-

15

28-Ju

l-15

23-Au

g-15

020406080

100120 0

0.20.40.60.811.21.41.6

Australian Dollar

Crude AUD (RHS)

Crude Price and Currency Movement


1-Jan

-14

27-Ja

n-14

22-Fe

b-14

20-Mar-

14

15-Ap

r-14

11-May-

14

6-Jun

-14

2-Jul-

14

28-Ju

l-14

23-Au

g-14

18-Se

p-14

14-Oct-

14

9-Nov-

14

5-Dec-

14

31-Dec-

14

26-Ja

n-15

21-Fe

b-15

19-Mar-

15

14-Ap

r-15

10-May-

15

5-Jun

-15

1-Jul-

15

27-Ju

l-15

0

20

40

60

80

100

120 33.13.23.33.43.53.63.73.8

UAE Dirham

Crude AED (RHS)

Surprisingly, even though UAE and Saudi Arabia are the world’s largest exporters / suppliers of crude, their currency is completely immune to the crude price fall

Crude Price and Currency Movement

1/1/201

4

1/25/2

014

2/18/20

14

3/14/2

014

4/7/201

4

5/1/201

4

5/25/2

014

6/18/2

014

7/12/2

014

8/5/201

4

8/29/2

014

9/22/2

014

10/16

/2014

11/9/

2014

12/3/

2014

12/27

/2014

1/20/2

015

2/13/2

015

3/9/201

5

4/2/201

5

4/26/2

015

5/20/2

015

6/13/2

015

7/7/20

15

7/31/2

015

0

20

40

60

80

100

120 3

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

Saudi Riyal

Crude SAR (RHS)

Source: Bloomberg ITM - Batch 34 (Finance)_MNCF_Group 3

Position of Impacted Countries


Russia’s Position in Oil Sector The petroleum industry in Russia is one of the largest in the world. Russia

has the largest reserves, and is the largest exporter, of natural gas. It has the second largest coal reserves, the eighth largest oil reserves, and is the largest producer of oil. It is the third largest energy user.

Oil Production and Export Ratio


Russia’s Position in Oil Sector (Contd)

Russian GDP and Oil prices relation

Russia Export Details


Russia & Oil • Government budget depending on oil and gas revenues. In recent years, oil and gas revenues have made up nearly half of Russia’s national budget.

• Around half of Russia’s total exports in terms of value are made up of oil and gas. Iron and steel come in at a distant second at less than 5 percent of the total export value.

• Majorly into defense sector oil is very important aspect for Russia.

•The oil and gas industry contributed about 50% of the Russian Federal budget revenues in 2014.


Norway’s Position in Oil SectorOil Production and Export Ratio


Norway’s Position in Oil Sector (Contd.)Norway GDP and Oil prices relation

Norway Export Details


Norway & Oil • Norway is in the global top 5 exporters of crude oil. The oil and gas sector.

• In 2013 Norway was ranked the 15th-largest oil producer, and the 11th-largest oil exporter in the world. It is also the biggest oil producer in western Europe.• Recent fall in oil prices resulted in some 12,000 jobs are being cut as the oil industry pares back about 10% of its workforce, and there are fears that nearly 30,000 more could follow.

•Oil in Norway is dominated by Statoil, the largely state-owned oil company, which controls about 70% of the country’s petroleum production.

•The big advantage that Norway has is the US$860bn (£565bn) Norwegian Government Pension Fund Global into which the oil money is deposited. Intended as an investment for future generations, it is the largest sovereign wealth fund in the world.


Canada’s Position in Oil Sector

Oil Export Ratio



Canada’s Position in Oil Sector (Contd.)

Canada GDP and Oil prices relation Canada Export Details


Canada & Oil • Oil and gas companies make up 20 to 30% of the value of the Toronto Stock Exchange (TSX), and these companies account for about 5% of Canada’s GDP.

•In 2008, the oil and gas extraction industry spent $54 billion in capital expenditures.

•In 2008, Canada’s petroleum exports accounted for 19% of all our exports.

•Oil exports are a key component of Canada’s merchandise trade surplus with the outside world.

•Millions of Canadians are affected by the petroleum industry, either through employment or ownership in shares of companies, Registered Retirement Savings Plans (RRSPs) and mutual funds. According to the TSX, the petroleum companies trading at the stock exchange were worth $357 billion9 as of December 31, 2009, with approximately half of these shares owned by Canadians.


Australia’s Position in Oil Sector

Oil Production and Export Ratio

2001 2005 2008 2009 2010 2011 20120

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

ProductionExport


Australia’s Position in Oil Sector (Contd.)

Including Oil resources


Australia & Oil • The oil, gas and energy industries are major contributors to the Australian economy.

•Australia has invested heavily in the oil, gas and energy industries and with continued population growth and the ever-increasing need for energy, future economic growth is a definite.

• Besides their domestic consumption, Australia also exports a large portion of their oil to other countries to earn revenue out of it.

•The majority of refinery output is used to supply the transport sector, however the agricultural industry, heavy industries, and general household activities are also reliant on locally produced oil products. If an Australian oil refinery were rendered unavailable for an extended period of time it would have significant consequences for the regional, and perhaps even national social and economic stability.



Key Takeaways• Positive factors

• Negative Factors

• Immune

• Overall Macro Economic Factor

• Political – Regional and Global Factors

Sources U.S Energy Information Administration Data Source - http://www.indexmundi.com/ The Organization of the Petroleum Exporting Countries (OPEC) Wikipedia – Countries Economy


http://www.indexmundi.com/

Thank You…


impact of oil prices crunch on currencies

Economy & Finance