Brent oil futures were trading at just under $113 on Thursday afternoon, raising the question of how expensive oil is going to get? Long oil trades have been well in the money since the Russian invasion of Ukraine began last week. The prospect of further energy sanctions produces a scenario which, we think, could push oil to a record level.
As discussed in our analysis of financial market risks in November, we anticipated that Q1 2022 would see very tight energy markets which would be a boon for commodity traders. This was without factoring in our #5 risk scenario which included a potential Russian invasion of Ukraine at some point in 2022.
For traders and hedge funds in the commodities space oil has been turning into a massive profit opportunity, when you consider traders were virtually being paid to hold oil in April 2020. But there are other factors at work here which could apply downside pressure if further energy sanctions come in.
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