Dangerous world adds risk premium

Ukraine Heats Up!

Rising tensions in Ukraine, violence and the possibility of the Ukraine government getting ready to act against rebels has oil and wheat rising. Gold hit a three-week high and is gaining on silver as systemic risk rises and fears that a conflict could slow the economy. The Ruble is rubbish. Palladium(NYMEX:PAK14) hit the highest level since 2011 on fears that supplies could be cut as Russia produces roughly 40% of global supply. In the United Nations the Unites States and Russia traded accusations pointing fingers at each other as the Libyan government says they are getting ready to act against the terrorists. Ukraine starts the week back in play overshadowing other news.

A deal to reopen Libyan oil ports has yet to produce any exports and some are still skeptical that all is well in Libya. The Wall Street Journal reported that an oil terminal in eastern Libya, which has been occupied by rebels, is on the cusp of loading its first tanker since the takeover, and another terminal has restarted operations, an oil official said Sunday.  Muhammad el-Harari, a spokesman for Libya's National Oil Corp., said a first tanker will "start loading one million barrels late Sunday or early Monday" from the Hariga terminal. The group, led by militia chief Ibrahim al-Jathran, has also agreed to leave Zueitina terminal. The rebels have yet to reach an agreement with the government on two larger ports, Ras Lanuf and Es-Sider. The oil company said western Libya's Zawiya oil port also has reopened after protesters seeking the resignation of parliament pulled out. Yet until the oil starts to move the market will be doubtful as it has been fooled to many times before.

Add to that Mario Draghi said that the strengthening of the Euro requires further monetary stimulus a sign that the EU is laying the groundwork for quantitative easing. The Euro rising is getting too much for Draghi to handle and it seems the mere force of his personality can’t slow it down. EU inflation is well below the ECB’s target of 2% and the strong Euro currency is hurting EU exports.

The AFP news agency is reporting that “twin blasts at a packed bus station in Nigeria's capital killed "dozens of people" on Monday, a spokesman for the state-run emergency services said.  "It's correct to say dozens of people were killed following the bomb blasts in Nyanya Bus Park this morning," Manzo Ezekiel of the National Emergency Management Agency (NEMA) told AFP. 

Oil(NYMEX:CLK14) is hitting key resistance and will move on the perceptions surrounding risk in Ukraine. So far the market has just put in the risk premium that the optimistic trade failed to put in last week. Now it all comes down to the headlines.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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