With the unrest in the Black Sea basin, it appears that there are two more cross-trade wars in the world. These are about energy and currency.
Crude oil prices, down most of Friday, finally ended the week higher after a huge fire broke out at oil facilities in Jeddah, Saudi Arabia, following attacks by Yemeni rebels.
The great winner of the Russian-Ukrainian conflict is undoubtedly the United States, which now seems to be taking advantage of Europe’s moment of weakness.
The latter is indeed currently switching its energy supplies from Russian natural gas (pipeline-transported) to the much more polluting and much more expensive US shale gas. The reasons are much higher extraction (fracking) and transportation costs since it requires additional processes such as liquefaction/degasification and the deployment of more port terminals that are able to provide such steps – also much more energy-consuming – linked to Liquefied Natural Gas (LNG) supplies.
(Source: ResearchGate.net)
By doing so, the European Union is going to increase its dependence on the US whilst a new and stronger block (including Asia) emerges on the East side.
As a result, we have already started to witness dedollarisation in international trade, with the petroyuan set to dethrone the heavily-printed petrodollar.
No wonder that the US dollar supply surge has ended up triggering uncontrollable and probably still underestimated inflation. As a result, this monetary virus is spreading through the global economy at a faster pace than any other variant!
WTI Crude Oil (CLK22) Futures (May contract, daily chart)
Henry Hub Natural Gas (NGK22) Futures (May contract, daily chart)
“Inflation is like toothpaste. Once it's out, you can hardly get it back in again. So, the best thing is not to squeeze too hard on the tube.” – Dr Karl Otto Pöhl
Trading positions
Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.
- Natural Gas [NGK22]
No new position justified on a risk/reward point of view. - RBOB Gasoline [RBK22]
No new position justified on a risk/reward point of view. - Brent Crude Oil [BRNK22]
No new position justified on a risk/reward point of view. - WTI Crude Oil [CLK22]
Long around the $99.55-101.29 support area (yellow band) with a stop just below $92.20 and targets at $113.90 & $120.66.
WTI Crude Oil (CLK22) Futures (May contract, daily chart)
Regarding risk management, it is always best to define your strategy according to your own risk profile. For some guidance on trade management, read one of my articles on that topic.
That’s all folks for today – happy trading!
As always, we’ll keep you, our subscribers well informed.
Thank you.
Sebastien Bischeri
Oil & Gas Trading Strategist
