Oil and gas prices soar on Ukraine conflict, gold and wheat catch a bid
Oil prices are close to eight-year highs after sanctions are imposed on Russia.
Oil prices remain at close to eight-year highs with key European benchmark Brent trading at over $100 a barrel as the Russian invasion of Ukraine continues to rattle the global energy markets.
Future prices on US benchmark West Texas Intermediate climbed again at the start of the week, with contracts for delivery in April now 9% higher than in February.
According to Carsten Fritsch, an energy analyst at German lender Commerzbank, these price rises are a direct result of sanctions imposed on Russia over the weekend.
With reports that a “huge” column of Russian troops were closing in on the Ukrainian capital Kyiv on Tuesday, oil markets appear set for further bouts of volatility and potentially higher prices as Russia accounts for 10% of global oil output.
Rising gas prices
Europe’s heavy dependence on Russian gas drove a massive 35% rise in European gas prices on Monday, as politicians in the region consider a ban on its import as part of a hard line series of sanctions in response to Moscow’s aggression towards Ukraine.
US natural gas prices posted more modest gains, despite suggestions that it could benefit from increasing shipments of liquified natural gas (LNG) to Europe in the event of restrictions being imposed on Russian gas imports by European nations.
There have also been moves by major East Asian LNG importers Japan and Korea to redirect cargoes to Europe in a bid to stabilise the European natural gas market.
Gold and silver catching up
Despite gold’s reputation as a safe haven asset, price moves in the yellow metal had been more modest than in the energy sector.
Spot gold rose to $1,942.66 per ounce, gaining 1.9% for the session.
US gold futures have settled just short of the psychologically important $2,000 mark. Gold’s all time high of $2,074.88 was struck in the earlier stages of the COVID-19 pandemic in August 2020.
The poor mans gold, silver, rose 3.79% overnight to $25.37.
Industrial metals on the move
Prices of key industrial metals such as aluminium, copper, steel and nickel have all caught a bid, largely due to ongoing inflation fears and Russia’s role as a major producer of industrial metals and concerns over disruptions to the global supply chain.
Nickel’s price rose over 4.21% overnight; this comes on the back of a bull run throughout 2021 when it went past levels last seen in 2011.
Australia to benefit from wheat price surge
Australia, alongside India, is set to benefit from rising wheat prices, due to the ongoing conflict in Europe.
Ukraine and Russia contribute a combined 23% of the world’s supply of the soft commodity with wheat futures in Chicago surging some 14.28% the last two day to $9.82 a bushel.
According to Ole Houe, the chief executive officer of brokerage firm IKON Commodities in Sydney, shipping firms are unwilling to operate in the Black Sea under current conditions while the impact of restricting Russia’s access to the SWIFT payment system places uncertainty over how any exports from the region can be paid for.