Gas, aluminum set new records; Oil, Wheat rise on supply turmoil

Brent Oil Climbs to Highest Since 2012*

Commodity prices rose even higher on Thursday as Russia’s invasion of Ukraine disrupted global commodity flows, sending gas, coal and aluminum to record highs, while crude oil and wheat hit multi-year highs.

Russia’s status as a top supplier of oil, gas, metals and grains has meant that the severe sanctions imposed on Russian companies following Moscow’s invasion of Ukraine have derailed critical resource supply chains.

“The invasion has turned markets upside down, supply chains have stopped working, which means we have dislocations everywhere,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

In the past week alone, since Russia launched its invasion, Dutch gas prices have more than doubled, Newcastle coal is up 85% and Brent crude is up a fifth.

Analysts warned that rising prices will crush demand in the near term due to supply shocks from Russia and a recovering economy in main commodity consumer China.

“This is the perfect storm in commodity markets,” Jefferies analyst Christopher LaFemina said in a note.

Brent crude extended gains to nearly $120 a barrel for the first time since 2012 after a fresh round of US sanctions was imposed on Russia’s oil refining sector.

“Oil prices are likely to continue to rise – potentially above $130 a barrel,” said Jarand Rystad, CEO of Rystad Energy.

Dutch gas prices hit a record €199/MWh, while Newcastle coal futures have also had a rapid run since sanctions were imposed on the third largest exporter, rising to a record $440 a tonne this week.

Aluminum achieves record

In the metals markets, aluminum hit another record high at $3,699 a tonne on the London Metal Exchange, while nickel rose 7.5% to an 11-year high.

Russia accounts for about 6% of world aluminum reserves and about 7% of world nickel mine supplies.

The precious metal palladium, for which Russia accounts for 40% of global production, rose as much as 4.8% to nearly $2,800 an ounce, a new seven-month high.

Gold was little stable as safe-haven demand was eroded by worries of further rate hikes, which pushed up the opportunity cost of holding precious metals.

For grain, Russia and Ukraine are expected to account for 28.5% of global wheat exports in 2021, according to the US Department of Agriculture, so global wheat prices have skyrocketed to try to offset a sharp drop in shipments from both countries.

Chicago wheat continued its rise, hitting another 14-year high, with weekly gains rising by more than a quarter as the Russian invasion further fueled fears of a massive disruption to exports from the Black Sea region.

US wheat futures rose as much as 6.5% to $11.09 a bushel.

Russia and Ukraine also account for 19% of corn exports and 80% of sunflower oil exports, which compete with soybean oil and palm oil.

Malaysian palm oil prices rose as much as 5.7%, hovering near record highs on expectations that buyers would turn to tropical oil to offset limited supplies of Black Sea sunflower oil.

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