Russia is backing off of its hostile stance this morning, sending the forces participating in the war games near the Ukrainian border back to their home bases. There are still thousands of troops in Ukraine's Crimea region, supposedly protecting the Russians who live in the area. Oil and precious metals are falling on this news, but the United States continues to react to Russia's recent moves.
Our guess is that Putin realized that he overplayed his hand and is taking a step back after having created the situation that he desired. His goal is to get the old government reinstated to power, but that now appears a long shot, especially after the world saw how the former president lived. The good news that has everyone hopeful is that Mr. Putin has stated that it is not Russia's intention to annex Crimea.
Chart of the Day:
This five-year chart of the US dollar versus the Russian Ruble shows the Russian Ruble falling to new lows. International markets are worried about the stance that Russia has taken, but even with Russia easing off a bit in the last 24 hours the talk of dropping the US dollar as a reserve currency does have some worried. Until Russian troops withdraw from Crimea or have the blessing of the international community to stay we think Russian bonds, equities and the Ruble will continue to face headwinds.
Source: Yahoo Finance
Commodity prices this morning are as follows:
- Gold: $1,337.70/ounce, down by $12.60/ounce
- Silver: $21.22/ounce, down by $0.265/ounce
- Oil: $103.46/barrel, down by $1.46/barrel
- RBOB Gas: $2.981/gallon, down by $0.0393/gallon
- Natural Gas: $4.593/MMbtu, up by $0.101/MMbtu
- Copper: $3.2085/pound, up by $0.0365/pound
- Platinum: $1,462.00/ounce, up by $1.30/ounce
BP Makes Moves
BP (BP) has been at the center of news the past couple of days as it has business interests in Russia and the Russia/Ukraine story dominated the news cycle yesterday. Today the company received news that the 5th US Circuit Court of Appeals would not overturn a judge's ruling that businesses did not need to have proof of a link between economic losses and the spill, which could result in $1 billion in damages to BP. The company said that it is weighing its options right now, which could lead to an appeal of this ruling.
Also announced today is that BP will place its US onshore assets in the "Lower 48" into a new separate company. The move is to allow the company to better capitalize and manage the shale assets that it possesses. The new structure will create a more limber company that is better able to compete with competitors and adapt to changes in the business without having to go through the old channels which create lag in the time an answer was given from when the original question was asked. This should be bullish for BP shares moving forward and could result in further asset sales down the road.
Energy Independence In Europe
Some countries in the EU have taken measures to insulate themselves from geopolitics roiling their energy markets, such as France with its first in class nuclear energy industry. Most however are dependent upon Russia for natural gas to keep their citizens warm during the winter months. With the issues in Ukraine once again putting the natural gas issue at the forefront, one play investors might want to look into as a play on Europe getting serious about building up its own natural gas production base is FX Energy (FXEN), a name we are from time to time bullish on.
FX Energy can be a rollercoaster based off of its well results, as the chart below highlights. We still think that this name could gain some traction should the market begin to look for names already looking for natural gas to supply European markets.
Source: Yahoo Finance
Currently we think that there are better places for our capital, however this is a name for investors to keep on their radar as the current crisis in Ukraine plays out.
The Potash Market
We saw yesterday that there was strength in Potash Corporation of Saskatchewan (POT), Mosaic (MOS) and Agrium (AGU) over the potential for economic sanctions against Russia, a major potash exporter. Although we understand the speculation taking place, we think that potash, like the natural gas flowing the Western Europe, would be spared sanctions as it is an important resource for the world's farmers and used to increase crop yields to feed the world's population. Further, there is little to prevent Russia from selling their goods to neighbors, such as China, and friends around the world because they possess the military means to keep the rest of the world's powers at bay. If we were holders of the North American potash producers this morning, we would be sellers moving forward.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: BP has previously been recommended.
