Russia’s invasion of Ukraine has catapulted the oil market into one of the most tumultuous periods it has ever seen -- and pushed some investors to the sidelines.
In two of the four trading sessions this week, Brent crude futures have swung by the most on record -- with intraday swings eclipsing $20 a barrel. In normal times, even a $5 move would see traders balk, and the current volatility is having precisely that effect.
The stress is showing up in gauges across the market. Open interest in the main oil contracts has plunged to a six-year low in recent days as traders retreat from risk, Volatility has rocketed, and exchanges have been boosting margins, effectively raising the cost of buying and selling.
With liquidity sapped, it could leave the oil market even more exposed to wild trading days, with headlines from Ukraine and OPEC+ members causing huge swings in a matter of minutes. That’s all in the context of a market that’s generally trading around some of the highest levels in years as governments and consumers around the world grapple with surging inflation.
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