New sanctions against Russia are kicking in, but the much-expected Russian oil ban in destination of European countries doesn’t seem to be part of them.
European reluctance to walk away from the Russian oil weighs on oil prices. The barrel of US crude eased to $112 per barrel as the latest news reduces oil bulls’ appetite to push the rally back above the $120pb level before the weekly closing bell, whereas the long-term outlook remains comfortably bullish as the combination of tight global supply, and the expectation that the global oil demand will reach a record high in the second half of the year should throw a floor under the short-term price pullbacks. Technically, the 50-DMA should continue acting like a major support, and it stands near $98 per barrel right now.
The new sanctions may not include a ban on European oil imports from Russia, but it well includes a ban on Russian gold, as there were signs that Russia was using gold to go around the international sanctions.
To stop that, the US issued a notice that gold transactions with Russia are now prohibited, which requires US people and companies to stop dealing with sanctioned Russian entities in an effort to further hammer the ruble’s power.
The Russian gold ban certainly comes as a response to Russia asking the ‘unfriendly’ countries to buy their oil and gas in rubles.
Russia has been building strong gold reserves since 2014 and the central bank is thought to have between $100 and $140 billion in gold reserves, which they may no longer use to convert against currencies that they can still trade.
The news shouldn’t have a negative impact on gold’s value, if anything we shall see the yellow metal extend gains toward the $2000bp on escalating tensions and looming uncertainties.
Last resort, Bitcoin
There is now news that Russia is considering selling its oil and gas in Bitcoin to ‘friendly’ countries like Turkey and China.
The news sent Bitcoin’s price above the 100-DMA resistance, yet there are a couple of questions that hang in the air.
One: China hates Bitcoin; will it change its mind to buy cheap Russian oil? If China buys the Russian oil in exchange of Bitcoin, will Chinese be able to trade Bitcoin as well? Then, how long the West, which recently didn’t want to impose restrictions on Bitcoin, will tolerate Russia going around sanctions via Bitcoin. Could the West ban the Russian Bitcoin like they did with the Russian gold? And if yes, is it even possible to ban ‘Russian’ Bitcoin?
Drying liquidity in commodity markets
Wild price moves and jaw-dropping margin calls push many investors out of the commodity markets, which, in return, reduce liquidity and has a boosting effect on price volatility.
Nickel has clearly become the face of that wild volatility, as the price surged 15% to the limit for the second day in a row yesterday. The rising commodity prices further boost inflation expectations and the central bank hawks, weigh on government bonds, yet equity traders remain surprisingly bullish.