Oil, Wheat, Nickel rush higher on fears of supply chaos

Oil jumps to 2008 highs, Brent surges above $139/barrel as US and Europe mull Russian import ban

Oil jumps to 2008 highs, Brent surges above $139/barrel as US and Europe mull Russian import ban

Commodity prices raged on Monday as industrial buyers and traders scramble to source commodities hit by supply disruptions due to Russia’s invasion of Ukraine.

Nickel surged 30%, platinum hit a record and gold broke through $2,000 an ounce as a safe haven, while oil and wheat surged to 14-year highs.

“In the midst of extreme volatility, nerves of steel are needed,” writes analyst Daniel Briesemann of Commerzbank in Frankfurt in a statement.

Russia’s invasion has met with worldwide condemnation, more than 1.5 million Ukrainians have fled abroad and sweeping sanctions have been imposed that have isolated Russia on a scale unprecedented in such a large economy.

Commodity markets have been rocked not only by harsh Western sanctions against Russia, which could be extended to oil, but also by logistical turmoil that has blocked the flow of grain and metals from the region.

The searing rally in commodity prices has raised concerns about economic growth in countries still recovering from the COVID-19 pandemic.

“I suspect that growth forecasts for 2022 will need a sharp downward revision around the world and it will be interesting to see what central banks around the world will do,” Jeffrey Halley, senior analyst at OANDA, said in a report.

Oil prices soared after the United States and European allies said they were considering banning imports of Russian oil.

Brent crude rose as much as 17.8% to $139.13 a barrel, its highest since July 2008, when it hit a record $147.50.

Analysts at JPMorgan said oil could hit $185 this year, while analysts at Mitsubishi UFJ Financial Group Inc said it could hit $180 and cause a global recession.

Concerns about an oil ban have also rattled European gas prices, which have hit record highs.

The panic prompted investors to buy gold, which is seen as a safe haven from turbulence in other markets.

Spot gold hit $2,002.40, the highest since August 2020.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.4% on Friday to 1,054.3 tonnes — the highest since mid-March 2021.

Palladium rose 15% to an all-time high of $3,440 an ounce on fears of a shortage of the metal, which automakers use in catalytic converters as Russia accounts for 40% of global production.

Industrial metals also surged, led by nickel, which surged more than 30% as global supply chains tried to price in potential shortages of supplies from Russia, the third largest nickel producer.

Russia accounts for 7% of world nickel mine production and 6% of world aluminum production.

Chinese iron futures also gained ground, with iron ore hitting a six-month high after a gloomy economic outlook over the weekend boosted expectations for more infrastructure spending in the world’s second-largest economy.

In agricultural markets, Chicago wheat futures rose more than 6% to hit a 14-year high as traders worried about the impact of the Ukraine conflict on supplies from Russia, the world’s top wheat exporter, and Ukraine.

With Ukrainian ports closed and operators reluctant to trade Russian wheat amid Western financial sanctions, buyers are scrambling to find alternative suppliers.

Russia and Ukraine together account for about 29% of world wheat exports and 19% of corn exports.

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