Cold Shoulder

Finimize

Contributor:
Finimize
Visit: Finimize

What’s going on?

The price of oil hit a 14-year high on Monday, after the US threatened to cut all ties with the world’s third-biggest oil producer.

What does this mean?

The oil price already hit an eight-year high last week, when global refineries and banks refused to buy the slippery elixir from a warmonger like Russia. And the supply squeeze now looks set to get worse: the West is ramping up sanctions in a bid to put more pressure on Russia’s flailing economy and bring the conflict to an end. The US government, for one, said this weekend that it’s thinking about outright banning Russian oil imports. And since that would leave an even smaller supply of oil up for grabs, its announcement drove up the price of Brent crude – a key international oil benchmark – to an eye-watering $139 a barrel on Monday.

Why should I care?

The bigger picture: Here comes stagflation.

The International Monetary Fund warned over the weekend that the effects of the war – including higher food and energy prices – could cripple the global economy going forward. It’s not the only one: JPMorgan’s economists just cut their outlook for global economic growth this year by 1% (tweet this), while some analysts have expressed concern that America’s ban might tip us into “stagflation” – the dreaded mixture of slowing growth and rising inflation.

Zooming out: China’s nothing if not contrarian.

China has mostly kept out of the fray so far, and the West’s sanctions aren’t exactly a pressing concern: Russian and Ukrainian trade and investment only make up a small proportion of its economy. That might be why the country is still confident it can grow its economy by 5.5% this year. As for how, economists reckon it’ll invest heavily in its infrastructure, as well as cut interest rates to encourage borrowing and spending – even as other major economies raise theirs.

Originally Posted March 7, 2022 – Cold Shoulder

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Finimize and is being posted with permission from Finimize. The views expressed in this material are solely those of the author and/or Finimize and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.