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How To Trade The Oil Major Exodus From Russia


Earlier this week, crude broke through the $100 level. It did so without really so much as a pause on a day when futures posted a massive 13.8% gain. If you missed that move or, like me, you simply got it wrong, you will be looking around for opportunities from here. It goes without saying that it is a difficult task at this point. Everything has moved already, and it is hard to say that crude, even up here, is overreacting to the situation given the possibility of an embargo on a producer as important to global supply as Russia. Where there has possibly been some overreaction that could result in an opportunity, though, is in the multinational, integrated firms that have, or have had, exposure to Russia that have dropped.

Not all of those stocks are about to bounce, though. You need to exercise some selectivity when looking for trades. Or, if you are a bit gun shy after getting the big move wrong as I am, you may want to consider a somewhat more complex paired trade, one that by definition includes a natural hedge. It relies on the difference in impact of withdrawing from Russia for different companies and how the market has reacted as they have announced plans to do that.

BP (BP), for example, has lost 18% from its pre-crisis high but may drop even further.

That is clear when you consider that estimates to the hit BP will take run as high as $25 billion and the company has a market cap of around $90 billion. On the other side of the ledger, the jump…

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