Oil Markets React to New Sanctions; Nvidia’s Caution Stalls Quantum Stocks

Oil prices surged Friday after the U.S. Treasury Department announced new sanctions on Russian oil, signaling potential shifts in global supply dynamics.

As of Monday morning, prices continue to rise as traders assess how the sanctions might affect exports to both India and China.

According to Bloomberg:

The new sanctions specifically target two companies responsible for over a quarter of Russia’s seaborne oil exports, alongside key insurers and traders linked to numerous shipments. The U.S. also widened sanctions on disruptive tankers…

The main focus is on major Russian energy firms — Gazprom Neft and Surgutneftegas.

In the initial ten months of 2024, these firms exported approximately 970,000 barrels each day, constituting about 30% of the country’s total tanker flows, according to Bloomberg data.

In response to the sanctions, Brent Crude (the European benchmark) climbed past $80, while West Texas Intermediate Crude (the U.S. benchmark) traded at $78. Meanwhile, natural gas futures emerged as significant beneficiaries, jumping over 6% since last Friday.

Recent Insights from Our Digest Highlight Opportunities in Fossil Fuels

Last Thursday, our Digest discussed the promising investment landscape in fossil fuels. Market analysts Louis Navellier, Eric Fry, and Jeff Clark identified routes to profit through Big Oil, natural gas stocks, and pipeline companies.

Focusing on Jeff Clark’s analysis, the recent uptick in oil prices activated the Bullish Percent Index for the energy sector (BPENER), which served as a notable buy signal.

For those unfamiliar, Jeff is a seasoned trading expert with 40 years of market experience, adept in leveraging various momentum indicators and moving averages to forecast stock movements.

Reflecting on last week’s developments, Jeff stated:

The BPENER is nearing a buy signal. If it behaves like previous signals, oil stocks may experience substantial gains…

Buy signals suggest upward movement occurs when the BPENER rises from oversold territory [below 30]. While it hasn’t reached that point yet, it’s currently in the oversold range.

This could result in a buy signal any day now.

As it turns out, that day was last Friday. The BPENER jumped from around 28 to 33.33.

Source: StockCharts.com

If you read last Thursday’s Digest, you may remember that Jeff has been considering the Energy Select Sector Fund (XLE) as a fundamental play on this movement. He noted the last time a similar entry signal occurred:

XLE experienced an immediate gain of 5%. It then retraced before making a significant rally, ultimately resulting in a 15% increase less than three months later.

Though this isn’t a formal trade recommendation, current conditions are aligned with Jeff’s entry signals. If you’re looking for a trade to consider today, this might be worth investigating.

Additionally, Jeff will be sharing his strategy for navigating Trump’s first 100 days in office, a period likely to be filled with aggressive policy changes and market fluctuations. Expect potential opportunities for traders willing to act quickly.

We’ll provide updates on this topic soon.

A Look at Quantum Computing Stocks: Are They Truly Stalled?

This autumn saw astronomical gains in quantum computing stocks, with some soaring between 500% to as high as 3,500% over a few months.

However, this momentum shifted dramatically last Wednesday when Nvidia CEO Jensen Huang dampened expectations for the timeline of quantum computing development.

Huang articulated his perspective on when quantum computing might reach practical viability:

If you kind of said 15 years… that’d probably be on the early side. If you said 30, it’s probably on the late side. But if you picked 20, I think a whole bunch of us would believe it.

Following Huang’s remarks, quantum stocks faced sharp declines. Here are the notable losses reported from Wednesday to Monday:

• Arqit Quantum (ARQQ) – down 50%
• D-Wave Systems (QBTS) – down 57%
• Quantum Computing Inc (QUBT) – down 60%
• Rigetti (RGTI) – down 63%

This downturn has collectively wiped out over $8 billion in market cap for the quantum computing sector.

Yet, our technology analyst Luke Lango remains optimistic about the future of quantum stocks. He commented in his Daily Notes for Innovation Investor last week:

We think Huang’s timing estimate is off.

With numerous real-world quantum applications already underway, we believe useful quantum computers are closer to 5-10 years away.

However, Huang’s comments triggered a justified sell-off. The stocks were overvalued and needed to cool down. To take advantage of this dip, patience is key.

Don’t rush to buy immediately. Wait for stability indicators before making any investments in quantum stocks.

D-Wave’s CEO Alan Baratz countered Huang’s caution, declaring him “dead wrong.” Baratz pointed out that their quantum computers are already being utilized by major clients, including Mastercard and NTT Docomo.

This exchange underscores the varying interpretations of practicality in technology. While today’s quantum capabilities may differ, advancements are undoubtedly on the horizon, albeit with uncertain timing. For those believers in quantum technology who can tolerate volatility, this sector remains one to watch.