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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

As energy prices skyrocket, how will US, China and Australia be impacted?

The price of oil, natural gas, and gasoline all jumped significantly despite the peace talks between Russia and Ukraine today.

Source: Bloomberg

Oil, natural gas, and gasoline all jumped over 5%, 3%, and 4%, respectively, substantially despite the peace talks between Russia and Ukraine.

Global Impact

US

If the geographic tension elevates with sanctions on Russian energy, it will very likely send oil prices to another sky-high. This would undoubtedly fuel the four-decade-high inflation in the US to move toward a double-digit price increase rate. In that case, a stall in economic growth and the rising unemployment figure would become the US government’s new source of headache.

China

China's recent effort to fix its power shortage and establish a direct correlation between coal prices and electricity rates could be derailed by the soaring energy commodity prices. That, in turn, could drastically slow China's economic growth.


From a longer-term perspective, China is the largest trading partner of Russia. The global sanctions on Russia's financial system, the catastrophic impact on the country's economy, and the large-scale depreciation of Russia's currency will undoubtedly translate into their trading value with China.

Australia

Australia will feel similar pain as the US amid the soaring oil price. The impact may be partially offset by the price boost for Australian energy exports. Australian thermal coal, a benchmark for the fuel used as an electricity feedstock, hit a record-high, as commodity markets around the world shook by the mounting concerns over the supply.

Source: Trading Economics

Brent Crude Oil

Brent crude regained the momentum on Monday after a sharp retreat last week. The price advanced aggressively by over 4% to move back on $100 per barrel. Current support can be found at the lowest point from the recent pullback near $94.65, a 20 day moving average sitting at $93.36 for now, will be the next support level.

The pressure level is looking at the recent top at $102. Above that level, the oil price will fresh a new eight-year-high and move toward $111, a level last seen in June 2014.

Brent Crude Daily Chart

Brent Crude Oil Source: TradingView

Brent Crude Hourly Chart

Source: TradingView

WTI Oil

West Texas Intermediate (WTI) oil price pulled back after briefly hitting the $100 mark last week. To kick off the new week, a nearly 5% push has brought the three-digit number back in view. Notable support can be found from the hourly chart at $95.77. While in the near-term perspective, the upper boundary of the moving tunnel formed in the daily chart should be the primary target for the WTI, which perfectly coincides with the $100 mark.

The market’s momentum, indicated by the RSI, shows no sign of declining as the RSI is aiming to re-enter the overbought territory soon.

WTI Daily Chart

Source: TradingView

WTI Hourly Chart

Source: TradingView

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This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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