Futures are sharply lower today on a reduction in war-premium (Russia – Ukraine). This weekend, President Zelensky is scheduled to meet with President Trump to discuss a 20-Point Peace Plan to end the war. The meeting has caused selling into the weekend as traders brace for optimistic headlines on an ending of the war.
We have reviewed a draft of the 20-Point Plan, prepared by Ukraine, and we’d like to update readers into the weekend on how we view this catalyst.
Apart of the current draft, there are certain Russian “red-lines” it distinctly crosses.
The territorial give-ups, which Ukraine has compromised on, have a “stay where we are” provision (borders drawn at militarily held front-lines). This would reward Russia with little gained territory at a cost of millions dead. Politically, this would be a tough sell for Putin to his citizens relative to the cost of the war.
But, the main red-line we see, is the provision for security guarantees by the U.S. and European allies of Ukraine. This would, in effect, put NATO on Putin’s doorstep without Ukraine officially having to join NATO. Part of the reason Putin started this war was to push NATO off of his door-step. Agreeing to this provision would be a huge loss for Putin, and as long as it stays in, makes this 20-Point Plan unrealistic in ending the war.
Technical Analysis:
Futures failed to punch out above resistance at 58.78*** and are now trading back down into the previous range below 57.67***. While we don’t see this peace plan as realistic, YET, the negative momentum shift should be noted. The disruption from Venezuelan supply curtailing is still apparent and is likely to pick-up steam and risk still appears skewed to the upside – AS LONG AS major changes to this peace plan aren’t agreed to over the weekend.
If Zelensky agrees to take out the security guarantees, this may be palatable to Putin, as he will not actually have to adhere to the agreement and can exert influence into the adjacent territories. Sunday night should feature a volatile trade and traders should expect widened ranges.
The sell-off today is fairly sizeable, but volumes are lacking due to the holidays. Quick reversals and outsized ranges become more probable through these thin holiday markets….
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