Global commodities see prices boil on Russia sanctions

BY: PHILLIP ISAKPA

A slew of Western sanctions directed at Russia in the wake of the country’s invasion of Ukraine kept global commodities prices in lava state as supplies by air and sea were significantly affected, cutting off access to the commodities.

Per monitored Reuters agency reports, the upswing in the price of crude oil continued, rising above $100 per barrel, while gas and wheat rose 17 percent and five percent, respectively, on concerns over logistics disruptions leading to cuts in supplies.

At the start of talks towards a ceasefire by officials of both Russia and Ukraine, gold had cooled only to make a one percent comeback because agreement was not reached and demand for the commodities by those seeking safe-haven returned.

According to the news agency, Reuters, there were rising worries about logjams in supply chains after several shipping groups halted activity to and from Russia while airlines cancelled cargo flights because of reciprocal airspace bans that hit both Russia and Europe.

“The current situation is highly volatile, with no sign of de-escalation, and the potential for existentially bad outcomes for all parties,” Berenberg analyst Richard Hatch is quoted as saying in a note.

“Our base-case scenario is one … with demand for commodities remaining strong and prices elevated for those commodities where Russia plays a material role in supply.”

A four percent rise to $102 per barrel was the response to concern over disruptions in supply for May brent crude oil futures, outweighing talk of a coordinated global crude stocks release.

For gas, there was a 17 percent soaring in price, again over disruption worries given that sanctions have avoided directly targeting Russian oil and gas.

“The fragile situation in Ukraine and financial and energy sanctions against Russia will keep the energy crisis stoked and oil well above $100 per barrel in the near-term and even higher if the conflict escalates further,” Louise Dickson, senior oil market analyst at Rystad Energy, said in a note to Reuters.

Metals also extended gains on worries over supply of palladium, aluminium and nickel, since Russian production accounts for global market shares of 40 percent, six percent and seven percent respectively, the news agency reported.

Another commodity recording a gain in price was palladium, up more than three percent caused by sanction induced disruption to shipments.

Aluminium hovered just below a record high of $3,525 a tonne touched on Monday while nickel also firmed, according to an agency report.

Rusal, the Russian aluminium producer, citing logistical challenges as it put a halt to production at its Nikolaev alumina refinery in Ukraine.

Supplies of energy-intensive aluminium and zinc could be further disrupted if European smelters decide electricity prices are too high to keep smelters running, per Reuters.

On the agricultural commodities markets, wheat futures on European Euronext rose by more than four percent in early trade based on worries about possible stoppage to Black Sea feed grain and oilseed shipments. Chicago wheat gained about percent, while corn price rose three percent.

Ukraine and Russia together account for about 29 percent of global wheat exports, 19 percent of global corn exports and 80 percent of world sunflower oil exports.

Malaysian palm oil futures saw a seven percent rise to record price level on Tuesday based on expectation of a rise in demand following the closure of Ukrainian ports hitting supplies of sunoil from the Black Sea region.