As Russia vows to retaliate against oil price caps, a slate of geopolitical risks could send crude prices soaring — or bring it crashing down
Good morning, readers. I'm Phil Rosen, reporting from Manhattan. Let's start with two key energy moves.
First, as you may have heard, Russia cut the tap indefinitely for Nord Stream 1 pipeline gas flows. Russian President Vladimir Putin today blamed Germany and Western sanctions for the halt in operations, but said that gas flows could restart tomorrow, provided it gets the key turbines needed.
Second, at OPEC's meeting Monday, cartel members agreed to cut oil production by about 0.1% of global output.
These two levers set the backdrop for today's newsletter.
As Europe's energy crisis rages on, more EU nations might start pivoting away from burning natural gas and instead try to lean into oil, according to Bank of America.
That could lead to more demand for crude, and so higher prices.
But the firm's forecast is ultimately mixed, reflecting the uncertainty of the times: Crude prices could either surge or crash more than 20% depending on how a smattering of risks unfold.
Buckle up.
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1. BofA analysts highlighted several variables that could send oil up or down by $5 to $20 a barrel.
A slate of supply and demand risks could make oil prices fluctuate dramatically, the foremost being a potential global recession.
According to analysts, manufacturing data suggests that a contraction in industrial activity is likely, which points to a downturn that could cut oil demand growth expectations by over 1 million barrels a day.
That could send Brent toward $75, the bank said.
Similarly, in the event of a new Iran nuclear deal, prices could fall temporarily by as much as $15 a barrel as an extra 1 million barrels hit the market.
Meanwhile, geopolitical uncertainty in Iraq and Libya threatens to push crude prices higher, as does China's potential reopening after stringent COVID-19 lockdowns.
A US-led price cap on Russian crude could also sway prices, but Russia's energy minister said the nation will respond by shipping more crude to Asia.
"Any actions to impose a price cap will lead to deficit on (initiating countries') own markets and will increase price volatility," Nikolai Shulginov said at the Eastern Economic Forum, per Reuters.
G7 finance ministers last week endorsed a plan to cap the sanctioned barrels as a way to minimize funding to Moscow's war machine, but Europe continues to take in huge amounts of Putin's supplies.
What's your oil price forecast and why? How do you see energy markets shaking out for the rest of the year? Email prosen@insider.com or tweet @philrosenn.
In other news:
2. US stock futures rise Wednesday, as the dollar surged dramatically against major currencies. Meanwhile, France is reviving a disused gas pipeline to help out energy-starved Germany. Here are the latest market moves.
3. On the docket: Richemont, Copart Inc., and Gamestop Corp, all reporting.
4. These cheap stocks are seeing "extreme dislocations" in price and still delivering strong profit growth, JPMorgan said. The list of names is ranked by highest growth stocks that are trading at a reasonable price and could be set for a comeback as the economic tide turns. See the list of 29 companies.
5. Bill Ackman said his firm is holding onto its stock picks as it anticipates central bank rate hikes cutting inflation to more than half current levels. "Our biggest fear was inflation and that's why I wanted the Fed to raise rates quickly and soon," the billionaire hedge fund boss said. Here's what you want to know.
6. Morgan Stanley said stocks have yet to bottom, and they could still fall another 23% this year amid slowing economic growth. But the firm also expects the S&P 500 to recover in 2023 — and it could reach as high as 3,900 by next June.
7. Russia's Gazprom is planning to sell gas to China in both rubles and yuan. The move comes as the energy giant aims to pivot away from the euro, and the new payment method is meant to take place immediately. Even before this, Russia has already taken payment for its oil exports in yuan instead of the dollar.
8. A top researcher at MSCI broke down why investors should be worried about a "brewing" liquidity crisis in the Treasury market. It's something that investors and market participants should be focused on, Andy Sparks said. Here are four investing ideas that he sees gaining popularity.
9. JPMorgan laid out different indicators to watch that will dictate whether stocks can power higher amid economic uncertainty and a housing slowdown. The bank explained what investors should watch for when trying to gauge whether names can still climb. See the analysts' top three signals here.
10. Fighting inflation over the next 18 months could bring the same kind of pain it did in the 1980s. That means a long road ahead of fewer jobs and expensive borrowing. Data suggests that the next year will feature layoffs, some continued price hikes, and pricey borrowing.
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Curated by Phil Rosen in New York. (Feedback or tips? Email prosen@insider.com or tweet @philrosenn).
Edited by Jason Ma ( jma@insider.com) in Los Angeles and Hallam Bullock (@hallam_bullock) in London.