President Trump drew down the Strategic Petroleum Reserves despite being a low energy price environment, which President Biden continued. The con argument is that this is a political decision in the months leading to the mid-term elections, and that this situation doesn’t represent an actual energy crisis in the US to use this strategic reserve for (unlike Europe, which has an actual energy crisis). The pro argument for this action is that it is a counter-cyclical release into a high energy price environment, which can lower prices and help the most vulnerable people afford necessary energy, during a war that is reducing energy availability. In recent days, President Biden directed the US Strategic Petroleum Reserve to begin releasing 1 million barrels of oil per day for the next six months, totaling around 180 million barrels in total drawdowns by the end. A lot of people in Ukraine and Russia are suffering from these decisions. There are plenty of journalists covering details around the full situation, including several specific atrocities that are happening in Ukraine. Latin American countries, African countries, and most Asian countries have avoided sanctioning Russia because they rely on Russia’s commodities.Īs a financial analyst, I’m mostly focusing on the numbers/finances/commodity situation in my professional work, even though the overall humanitarian story is the bigger picture. There have been reports of progress on ceasefire talks but nothing concrete yet, and there does not seem to be enough pressure to make Putin pull back, even though the speed of the war is clearly going much more slowly than he anticipated. The war continues to rage on, with increasing civilian deaths in Ukraine. If I were a domestic Russian investor, I’d be buying Russian stocks with a careful amount of capital (along with gold and bitcoin, and foreign assets where possible), but of course foreign investors have political and ethical realities to be aware of regarding any Russian assets now, so that market is not really investable for most people. Some like Lukoil have partially bounced back well considering the circumstances, while others that were more directly impacted by sanctions like Sberbank remain in a collapsed (but potentially bottoming) state. However, the ruble began slipping in the weeks prior to the invasion, and it hasn’t yet fully recovered to that level, but it’s close:Īlthough the US-dollar denominated ADRs and ETFs are not trading, ruble-denominated Russian stocks are trading again. Meanwhile, the Russian ruble has recovered all of its losses vs the US dollar that it encountered since the day of its invasion of Ukraine. Therefore, ongoing Russia/Europe relations around gas deliveries remain tense. But also, Russia has no immediate ability to sell all of its gas elsewhere, either, and so it would lose that revenue. Such a transition will take a lot of time and expense. Contracts are difficult to renegotiate in a short period of time.Įnergy rationing is on the table in some European markets because if supply contracts break down, Europe has no immediate ability to replace all Russian natural gas with LNG. This has caused some recent market turbulence and confusion. Russia has demanded that “unfriendly” countries, now including many European countries due to sanctions, begin paying for gas in rubles by opening a Russian bank account and doing a euro/ruble conversion. WTI crude continues to trade at rather high prices, and has experienced extra volatility due to the war and sanctions. This section walks through updates on some of the major items impacting markets. This continues to be a time with significant macroeconomic uncertainty, with energy shortages, central bank tightening, yield curve control, and other issues. Lastly, the stock section of this report highlights a number of companies and industries that still have favorable growth prospects for 20 at a time when analysts are rather bearish on growth expectations for the broad S&P 500. Then, there is a significant bitcoin and crypto update. The macro section of this report focuses on energy, interest rates, and currency comparisons, and takes up extra length in this report due to the complexity of current macro conditions.
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