UK Oil Volatile Amidst WarPublished On: 28 March 2022, 1:01PM | Jeraldine Tan, Senior Dealer
UK Oil had been in an uptrend with recovering demand and inflationary pressure. However on the onset of the Russian-Ukranian war, the markets started its climb, starting to factor in the possible effects of war.
As soon as Russia invaded Ukraine, market shot up to a high of 134.60 on the back of various sanctions on Russian oil (however, to note Russia is a key supplier of oil and gas). As of now, market is already finding it difficult to pay Russian entities, causing Russian oil to not have a home.
Market is starting to reflect a tight market again but with strong oil prices, that would drive up prices of goods and services (oil and gas are key inputs). So there will eventually be some way to solve this;
- easing of sanctions on Russia to exempt oil related transactions
- hearing US wants to release their crude reserves
- other producers will produce more to capture this price
These few solvers above will drive prices lower. As of now, bulls can enter to ride the trend hoping to test the previous high again. Bears can enter with a view that solvers will come in and market will return to the most recent low.
But market is now in the middle of the recent high-low range so these may not be good risk reward trades. Instead, bulls may enter half their risk now and scale in lower as market re-tests the low. Bears can enter half their risk now and scale in at the most recent high should there be clearer news on solvers.
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