The economic forces of supply and demand are feeding into higher oil prices. Of course, the Russia-Ukraine conflict only added jet fuel to the situation, with the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH) pushing 9% higher the last five days.
With more sanctions coming down like heavy rain on Russia following its invasion of Ukraine, there’s a crimp on oil exports out of the country. Meanwhile, Russian crude took a hit in the commodities market, which accounts for 10% of the global oil supply.
“The tight global oil market could become even tighter following last week’s Russian invasion of Ukraine,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Russia, however, won’t stand idly by. The country could essentially apply a tighter stranglehold on its oil supply, which would deliver a gut punch to Europe.
“Russia could retaliate to these harsh measures by reducing or even completely suspending energy shipments to Europe,” said Commerzbank analyst Carsten Fritsch.
GUSH seeks daily investment results of 200% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The fund invests at least 80% of its net assets in financial instruments and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
Russian Oil Exodus
Countries that were once reliant on Russian oil are now seeking other alternatives. According to analysts, this could also disrupt Russia’s oil production in the near term.
The United States is expected to tap into its emergency oil reserves to cope with the decreased supply, which in effect is translating to pain at the pump with higher gas prices. Additionally, Reuters reports that major oil companies like Shell are heading for the exits following Russia’s invasion.
“We cannot – and we will not – stand by,” said Shell chief executive officer Ben van Beurden.
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