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Can Investors Profit from The Russian Oil Price Cap?

A group of nations, namely the G7, Australia, and EU members, recently imposed a $60-per-barrel cap on crude oil coming out of Russia. The purpose is to punish that country’s government for invading Ukraine. There are plenty of questions about how the ceiling of $60 will work, especially in light of the fact that the cost of WTI (West Texas Intermediate) petroleum could be headed downward in the coming months.

If that happens, the cap would be rendered virtually useless, and the Russians would still earn a tidy profit even with the limit still in place. Plus, there are myriad ways for any nation to get around the cap. The bottom line is that the anti-free market price capping rule could wreak some serious havoc on international energy markets at the worst possible time. What can investors do to keep their capital safe and avoid the many problems that come with price-fixing schemes?

Possible Tactics

Fortunately, there are several tactics that can work for people who not only want to take defensive financial action but also wish to make a profit on the expected volatility. Perhaps the single most effective way for investors and traders to proceed is to avoid crypto mistakes and use forex options as protective tools. Additional tactics include exploring the precious metals for purposes of portfolio diversification, avoiding Russian-based oil commodities, for the time being, staying on top of financial news, and more. Consider the following strategies if you intend to protect capital and possibly earn a profit on the expected effects of the artificial price cap on Russian oil. Pay close attention to the progression of the Russia-Ukraine war, which is the primary cause of volatility in oil markets right now.

Use Forex Options for Safety

Forex options can be a simple and efficient way to protect capital in a volatile financial environment. That’s particularly true for investors who worry about currency fluctuations in the near future. Anyone who uses a forex options trading platform can enter into positions that have the power to offset swings in the price of oil. Not only are FX options a relatively safer instrument that direct ownership of oil stocks or futures, but they offer savvy investors the chance to earn income by correctly speculating on changes in currency values.

Explore Precious Metals for Diversification

Profiting from the petroleum price cap of $60-per-barrel on Russia’s most precious energy commodity can be a challenge. However, history can teach a few lessons about the wisdom of investing in gold, silver, and other precious metals during times of wild price swings in the oil marketplace. Often, the precious metals sector rises in value when other commodities on the global market are suffering from huge price swings.

Trade Non-Russian Petroleum

Logic will dictate that if you want a shield against an uncertain commodity sector, avoiding it is the easiest path. While petroleum and the energy arena, in general, are relatively difficult to predict, there are trends in the free market. So, assuming that the price fixing remains in place for at least a year, what can energy investors do? One approach is to follow the movement of Brent crude and WTI, both of which are part of the international benchmark network in the energy segment. What’s in store for the first half of 2023? In the case of WTI, there’s already a steady downward movement in place. For people who do in-depth research and come to that same conclusion, it could be profitable to take positions that focus on a $65-per-barrel WTI price by mid-year, perhaps in June or July.

Avoid Energy-Based Commodities

The alternative idea, especially with crude output and petroleum demand rising, is to get out of energy altogether. Unfortunately, if that is your area of specialty, the move means sitting on the sidelines in cash for a year or more. For those who want to stay in the investment game and continue to trade, both forex and options markets offer potential benefits in uncertain economic scenarios. Holders of options contracts or forex currency pairs aim to make accurate predictions about the direction of prices, which can be a much wiser technique when the majority of stocks are in a bearish mode.

Trade the News

People who enjoy making educated guesses based on relevant news reports employ a method called trade the news. The system has been around for decades and gained widespread popularity in the early half of the 1900s. For oil enthusiasts, it means following daily media stories about the Russia-Ukraine war, the price levels of petroleum, the actions of OPEC+ nations, and other information that could have a direct impact on energy and petroleum markets.

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Written by Valentina

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