HomeMarket NewsRussia's 'temporary' diesel export ban refocuses concerns on market tightness

Russia's 'temporary' diesel export ban refocuses concerns on market tightness

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Data analyzing in commodities energy market: the charts and quotes on display. US WTI crude oil price analysis. Stunning price drop for the last 20 years.

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U.S. crude oil futures barely increased by 0.01% for the week, marking the 11th gain in 13 weeks. However, the market remains uncertain as investors debate whether crude oil is overbought or if prices could reach triple digits for the first time since July of last year.

Front-month Nymex crude for November delivery closed the week at $90.03 per barrel. In contrast, Brent crude experienced a small decline, shedding 0.7% to settle at $93.27 per barrel after posting three consecutive weeks of gains.

Even amidst the Federal Reserve’s warning of further rate hikes, the energy markets were also focused on Russia’s temporary ban on diesel and gasoline exports. Russia, being one of the world’s largest seaborne diesel exporters at approximately 1 million barrels per day, is expected to face higher diesel prices due to the ban. However, the extent of the impact will largely depend on the duration of the export ban.

The Kremlin claims that the ban is a temporary measure aimed at addressing rising energy prices within Russia. However, Western countries suspect that Vladimir Putin is using Russia’s power over energy markets for political leverage, with implications for the upcoming U.S. presidential election. According to Helima Croft from RBC Capital, Putin’s objective appears to be to cause instability and weaken Western support for Ukraine.

Analysts from Citigroup and J.P. Morgan Chase predict that the ban will likely last for weeks rather than months. Once the peak demand for agriculture passes and Russia is able to harvest its expected bumper crop, the need to restrict diesel supply should decrease.

Although the diesel export ban will have an impact, Russia’s gasoline exports are relatively small, with only 90,000 barrels per day in August, according to Kpler.

Energy stocks, represented by the Energy Select Sector SPDR ETF (XLE), suffered a decline of 2.9% for the week, ranking in the middle of the S&P sector standings.

Top 5 gainers in the energy and natural resources sector over the past 5 days: LZM (+39.8%), ATLX (+13.1%), WAVE (+11.3%), LTBR (+11%), GPP (+10.9%).

Top 5 decliners in the energy and natural resources sector over the past 5 days: AMTX (-15.8%), LAC (-15.2%), PLL (-14.8%), USAU (-14.8%), NRGV (-14.2%).

Source: Barchart.com

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