It may not have been on day one of his Presidency, and it may not be an immediate end, but Donald Trump waded into the Ukraine war yesterday. Conducting back-to-back phone calls with Presidents Putin and Zelensky and portraying the usual ‘art of the deal’ panache, he victoriously claimed the Putin has even used his campaign motto ‘common sense’ and that a meeting would soon take place in Saudi Arabia between the US an Russia. Far be it from anybody to point out that the Russia leader could be playing up to vanity, or that Ukraine is being slowly sold down the river as not only can it not expect to join NATO, it will have to abandon its demand to reinstate borders pre-2014, as in Crimea, but Kyiv will also have to give over lands taken in the invasion of 2022. “There will be no just and lasting peace in Ukraine without the participation of Europeans,” French foreign minister Jean-Noel Barrot echoed the feelings from the UK, Germany, Poland, Italy and Spain as Europe possesses the greatest vulnerability to further Russian expansion. This is no done deal, the US President does not get to say “you’re fired” and move on. Spain’s Foreign Affairs Minister, Albares Bueno caught the mood and why this conflict cannot be ended on will alone. “We want peace for Ukraine, but we want an unjust war to end with a just peace.”

Still, the prospect of taking the second author, the first being COVID, of the world’s economic demise from geopolitical thinking resulted in copybook reaction. Equities took a run and oil experienced a fade. Oil prices have developed a knack of pricing future events in the here and now, therefore, with the prospect of unharnessed Russian oil making its way across the sea lanes, the gains made so far this week in crudes have been completely erased. The Ukraine news was an accelerator to a downward turn, for the EIA inventory report held yet another build of 4.1mb in crude stocks as US refiners continue in the program of maintenance. The Putin phone call banner headline also drowned out the faster than expected US CPI reading, a script driven Powell on Capitol Hill offering a 2025 of interest rate caution, which was greeted with a counterintuitive fall in the US Dollar. Explaining away reactionary markets and reactionary politicians is now a case of post-mortem, it is utterly fascinating, and, as touched on below, sometimes impossible.

What to do next?

One of the hazards of being involved in the oil space at present is that getting comfortable in any seat of thinking can be a dangerous thing. Developing an internal dialogue of reasoning surrounding contemporary influences, leading to expectation, misjudges the myriads of trip wires, be they glaring or subtle and even once market-defining news that has largely been emotionally put to bed. There is a tendency to pair bullish and bearish drivers which act as a sort of range in thinking. At present, one might comprehend the imposing of sanctions on Russia, and tariffs on Canada and Mexico to be bullish, well at least in the short-term until such oils are replaced. This is countered by fears of what a world ensnared by tariffs might do to demand in all forms including the need for oil.
Yesterday, before the details emerged, the US President on his ‘Truth Social’ posted, “I just had a lengthy and highly productive phone call with President Vladimir Putin of Russia. We discussed Ukraine, the Middle East, AI, the power of the US Dollar, and various other subjects.” There are many twists and turns in which these wily operators can hide and draw out negotiation, but any sort of settlement must, from a Russian point of view, come with sanctions relief. If indeed such an outcome emerges the short-term bullishness experienced in Asia where alternative crude grades are being inflated would dissipate. One wonders if President Volodymyr Zelensky sees the writing on the wall. Last Friday, and for the first time, he expressed a willingness to cede territory to Russia to end the war.

Alternatively, imagine the late-night candle burning by the great and the good of investment management in trying to strategize an impending tariff war? At the close of business one Friday night the world was about to witness the promise of tariffs against Mexico and Canada, only to be undone come the following Monday morning as monthly moratoria were doled out as easily as they were threatened. Bullishness in the nearby and bearishness in the future, if that is indeed one’s reading, was made moot with only frustration left as any sort of residual. Still, they are the only considerations in this current game, would be logical thinking, until they are not.
Do not look now, but remember that threatened spread of Middle East war with which market reaction got bored as Israel all but put paid to its nearby enemies? Well, it is back. In a sadly predictable turn of events, Hamas and Israel swap accusations of breaking the ceasefire but what looks likely to be the eventual truce-buster is the tardiness in which Israeli hostages are being handed over. In a statement on Tuesday evening Benjamin Netanyahu, the Israeli Prime Minister, said the “ceasefire will be over, Israel will resume intense fighting if Hamas does not release our hostages”. Lighting a candle under the boiling maelstrom of the Middle East does not seem very hard to do, which is why it has been ignored. Do the ramifications of a restart in hostilities within the area realise the same foreboding as seen at the start of Israel’s war campaign last year? Probably not. Iran’s proxies are defanged, and Tehran is under so much microscopic scrutiny from Washington that it dares not put any more of a target on its back. Nevertheless, the unpredictability of events and indeed ability for the region’s peoples to conduct unspeakable acts cannot preclude consideration. A reminder of Isreal’s unfinished business came in a piece from the Washington Post on how US intelligence sources believe the IDF will attack Iran’s nuclear program by the middle of the year.

The point of this elongated dip into oil drivers; be they new, old, considered or as of yet unseen, is to verify what most of our fraternity is thinking. It is unwise to be married to particular streams of trading consciousness or opinion. Bullish becomes bearish, and contemporary news is measured in hours rather than days, weeks or months. In such circumstances, day trading and short-term risk will increase while long-term strategizing must be hedged with doubt. Welcome to modern oil trading and opinion forming, and be prepared to get used to it.

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