Russian Crude Oil Price Cap And Price Mechanism

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Prices as of 4 pm ET, 11/22/22; % YTD

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MARKET UPDATE

Volumes this week are close to yearly lows

• Expect more of the same for today

Thursday U.S. Thanksgiving

• U.S. stock exchange closed

• Fixed income markets closed

Friday

• U.S. stock exchange closed at 1 p.m.

• Fixed income markets closed at 2 p.m.

2 p.m. Fed minutes from November 2nd meeting

• Next Fed meeting December 14

VIX        

• Volumes and Volatility are Low

• VIX at its lowest level since August

Crude    $78          

• Lower despite API reporting a crude draw

Europe diplomats meet today

• with the goal of approving Russian crude oil price cap and price mechanism

• EU discussing capping /Russian oil at $65-70 per bbl, close to the $78 it is trading today

• Dual goal of:

  • Keep Russian oil flowing as much as possible

  • Limit Russian revenues

• will probably not be met.

• Russians can say “we’re selling at market prices” (to China, India, etc) thus keeping Russian production at current levels

  • Russian will probably not say “we’re selling at the cap”, so Russian revenues will not be limited.

• Ultimately, the market price will determine what Russia does

  • If oil prices fall below the cap, will Russia reiterate that it won’t supply countries that participate in the cap?

Apple AAPL

• Apple workers at its main China plant clashed with security staff

• after being locked up for almost a month under Covid restriction

• Best Buy BBY said high-end iPhones will be in short supply during the holiday season

Earnings

• VMware VMW

• Autodesk ADSK

• HP HPQ will cut 10% of its workforce

• Nordstrom JWN

• Deere DE +3%, beat and guide raised,

• Credit Suisse CS $88 billion in outflows, expects Q4 pre-tax loss of $1.6B 

CRYPTO UPDATE

Digital Currency Group

• Says no imminent thread

• Owes Genesis (which it owns) $575 million

  • Due May 2023

• Also owes Genesis $1.1 billion on promissory note due June 2032

• “Collectively we will come out of it stronger”

• Genesis hired investment bank Moelis & Company to explore options including bankruptcy

Cathie Wood: still very bullish

• Sticking to $1 million price target by 2030

• Bitcoin BTC/USD will come out of crisis smelling like a “rose”

SBF apology letter to FTX staff

• “I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again”

• “I did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash”