Markets 2 recover as investors weigh the ban on Russian oil

Dow finished down 184, advancers slightly ahead of decliners & NAZ was off 35 in usually volatile trading.  The MLP index went up 3+ to 211 & the REIT index was off 2 to 455.  Junk bond funds continued weak & Treasuries were hit with selling, raising the yield on the 10 year Treasury 11 basis points to 1.87%.  Oil jumped 4+ to the 124s & gold surged 48 to 2044 (more on both below).

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Lifting US regulations on liquefied natural gas exports could help alleviate Europe's dependence on Russian gas, the head of a liquefied natural gas trade association said.  Russia's invasion of Ukraine has caused gas prices to soar 7 has European nations reconsidering their long-standing reliance on Russian oil & gas.  Pres Biden just announced a ban on Russian oil & gas imports, which he said targets the "main artery of Russia’s economy."  The US could help ween Europe off of Russian energy by exporting more liquefied natural gas, US LNG Association CEO Frank H. Hutchinson said.  "Europe depends on Russia for about 40% of its natural gas," Hutchinson added.  "That's delivered from pipelines that go back to the Soviet era."  "U.S. [liquefied natural gas] has brought competition to the region," he continued.  "It's helped countries like Poland and Lithuania – both of which had almost 100% dependence on Russian gas – reduce that dependence."  "Right now, the world is short on oil, the world is short on gas," the CEO said.  "We have got plenty of it," Hutchinson continued.  "And there's a lot more that can be done.  "There's been a leasing pause that the administration has put in place, and there are permitting issues and other factors that are limiting production," Hutchinson said.  "Remove those obstacles, get production up."  The Dept of Energy regulates how much liquefied natural gas is exported, putting a ceiling on how much can be sent to European countries, including Ukraine.  "The federal government sets a ceiling on how much gas can be exported from the United States," Hutchinson said, noting that other energy commodities don't face such caps.  Many pipelines carrying gas from Russia to Europe flow thru Ukraine, but the market reflects conditions that began before the war, according to Hutchinson.  "The world has been short on natural gas really since the recovery kicked in from COVID back last fall," Hutchinson said.  "So even before all of this war in Ukraine, there were really tight markets."

US could increase gas exports to help Europe move from Russian energy: CEO

The war in Ukraine is raising concerns about higher food prices worldwide.  Russia & Ukraine account for around 29% of global wheat exports, 19% of global corn supplies & 80% of the world's sunflower oil exports.  This reliance has many traders worried that any further military force could trigger a massive scramble by food importers to replace supplies normally sourced from the Black Sea region.  Wheat futures reached record highs, following a 14-year high at the end of last week.  Wheat prices reached a 14-year high on Fri, with Chicago futures for grain closing 41% higher than the previous week at $12.09.  That jump marks the biggest gain over six decades. Yesterday, the price closed up for the 6th consecutive day.  While market volatility and potential disruptions in exports in wheat & corn are driving prices, farmers are bearing costs from ongoing supply chain snarls.  "While U.S. wheat prices rose, farmers have also been experiencing a price increase for key inputs – not only related to this conflict – but from the existing stresses that have been impacting the entire supply chain for some time," CEO of the National Association of Wheat Growers, Chandler Goule, said.  Russia is also one of the world's biggest exporters of all 3 major groups of fertilizers & officials have said it could suspend exports, leaving farmers to bear the cost of any prolonged shortage.  Prices for fertilizer are already up as much as 98% from a year ago.  2 of the key fertilizer forms, including nitrogen-based Urea & the world's most widely used phosphorus fertilizer, diammonium phosphate, are up nearly 99% & 68% year-over-year respectively.  Threats to supply cuts and spiking prices have some farmers concerned about hoarding.  Economists warn that any cuts in supply could result in a surge in already high nutrient prices & further hike up food prices.  Prices worldwide already reached record highs in Feb, jumping nearly 21% from a year ago, according to the United Nations' Food & Agriculture Organization.

Ukraine war prompts food price hikes, shortage fears

The US has a long way to go before the pandemic is over & life returns to semblance of normalcy as deaths from Covid-19 remain far higher than seasonal respiratory viruses such as the flu, a group of 2 dozen scientists, doctors & public health experts said in a 136-page report.  The report lays out a road map for the US to transition to a new normal in which the country can live with Covid without major disruptions to daily life.  While the nation has made progress, Covid is still causing an “intolerable” level of death that far exceeds the toll of the flu and respiratory syncytial virus, or RSV, even during bad years.  In years past, as many as 1150 people died weekly from respiratory viruses like flu & RSV without the implementation emergency mitigation measures.  However, Covid's death toll remains about 10 times higher with 12K people succumbing to the virus some weeks.  More than 9000 people have died in the last week alone from Covid, according to the Centers for Disease Control & Prevention.  White House chief medical advisor Dr Anthony Fauci has previously said the US can safely return to a more normal way of life when the disease burden from Covid resembles common respiratory viruses such as the flu & RSV.  “Make no mistake, the United States is far from a normal situation,” the authors wrote.  The report comes as elected leaders across the nation are lifting public health measures in response to a dramatic decline in Covid infections & hospitalizations from the peak of the omicron wave this winter.

U.S. far from normal with Covid deaths 10 times higher than flu, RSV

Gold futures climbed above $2000 an ounce, but settled below their highest price on record, as the war in Ukraine fueled bids for safe haven assets like bullion.  Apr gold rose $47 (2.4%) to settle at $2043 an ounce & traded as high as $2078 which put bullion at its highest levels in 19 months.  Prices traded near the all-time settlement high of $2069 in Aug 2020 & intraday record high of $2089 also in Aug 2020.  Despite the rally in gold, some market participants are skeptical about the continued upside in the precious metals.  At least one strategist speculated that restrictions on purchasing crypto, such as bitcoin, would prompt Russia's central bank to dump a chunk of its reserves of gold to get cash.  Thus far, gold prices & those for other precious metals, have been buttressed by doubts about central bankers' ability to limit the rise in inflation in the face of the geopolitical tensions. 

Gold ends above $2,000 but holds just below an all-time high

Oil futures rose, building on the highest finish for the US benchmark since 2008, as the US announced a ban on crude imports from Russia.  West Texas Intermediate crude for Apr rose $2.73 (2.3%) to $122.13 a barrel, but prices eased back from the session's high of $129.44.  Yesterday, they settled at the highest since 2008.  May Brent crude, the global benchmark, was up $2.88 (2.3%) at $126.09 a barrel after finishing yesterday at its highest since 2012.  Oil futures have marched higher in the wake of Russia's Feb 24 invasion of Ukraine & gained yesterday after the EU announced a plan to reduce its dependency on Russian energy & Pres Biden announced a ban on Russian oil imports.  The EU presented a plan to reduce its dependency on Russian energy, with a pledge to cut its purchases of Russian gas by 2/3 before the end of the year.  Meanwhile, Pres Biden announced a ban on Russia oil imports today.  Russia is the world's 2nd-biggest petroleum exporter & usually exports 4.5M barrels of crude & 2.5M of oil-products each day.  However, last year only about 8% of US imports of oil & petroleum products came from Russia.  Last year, the US imported nearly 700K barrels per day of crude oil & refined petroleum products from Russia, the White House said.  Sanctions against Moscow announced so far have exempted energy flows, but a number of buyers & other market participants have shunned Russian crude oil out of fear of potentially falling afoul of legal restrictions or in response to criticism.

Oil prices gain nearly 4% as U.S. bans Russian crude imports; gasoline prices hit a record high

Trading today was all over the place.  Dow was flattish in the AM.  At midday it rallied.  Then it sold off & then bounced up again followed by selling in the last hour.  Meanwhile gold, oil & wheat, among many commodities, are at or very near record levels.  That's called making it up as you go along.  Maybe overnight, more relaxed thinking will better prepare traders for tomorrow.  Longer term, the Dow was back to where it was about a year ago.

Dow Jones Industrials