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Column | Futures File

Walt Breitinger: Leaders Xi, Putin, Biden, & bin Salmon drive crude on wild ride

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Shortly after the U.S. and its group of seven European allies set a $60.00 per barrel cap on Russian Crude prices, China’s President Xi and Saudi Prince Mohammed bin Salmon met on Thursday to discuss crude production levels. That weighty discussion reminded us that both discord and alliances can quickly form as the four key economic powers chime in with incentives and threats, each trying to secure an economic advantage by affecting crude supply and demand.

Just as recent wars have been fought over the supply of crude, cozy relationships often sprout up with those who control the black gold while other nations feud over who will export to whom and at what price. On Friday morning, crude rose in response to Putin referring to the price cap imposed by the West as “stupid,” since Russia could easily cut production in order to raise prices. Gasoline prices, reflecting fears of recession, fell to the lowest levels since the Covid outbreak began over a year ago.

Cotton falls on declining demand

Those same fears of recession in Asia, Europe, and North America sank cotton prices to lows not seen for months. Both yarn and clothing prices are on their way lower, demoralizing investors who bought a month or two ago.

COVID concerns could cause recession

Just as China has relaxed Covid restrictions, Beijing is faced with the possibility of dramatic outbreaks of Covid. Fresh outbreaks could cripple their economic recovery that has barely gotten underway. Chinese demand is paramount to supporting prices of U.S. grains, livestock, energy, and fertilizer products.

Biggest gainers and losers

Soybean meal and orange juice saw the sharpest rise. The energy markets lost the most, with January crude down $9.00 per barrel, January diesel down 25 cents per gallon, and gasoline down over 25 cents. January natural gas lost 50 cents per mm BTUs by Friday afternoon. March cotton closed at 81.05, which was down about one and a half cents per pound this week. Grain markets were relatively stable, with March corn at $6.34 per bushel, January beans at $14.83, and March wheat at $7.33 at Friday’s close.

Words of wisdom for speculators

"There is probably no class of trades with a higher failure rate than impulsive trades." — Jack Schwager in Market Wizards

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Indiana. He can be reached at 800-411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

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