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Oil tops $100, gas, grains, metals spike as Russia invades Ukraine
Global Banking & Finance Review®
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By Nina Chestney, Nigel Hunt and Pratima Desai
LONDON (Reuters) -Commodity prices jumped to multi-year highs on Thursday after Russia invaded Ukraine, raising the prospect of tighter supplies due to the possibility of sanctions on Russian exports, transport disruptions and Moscow withholding supplies.
Russia launched an all-out invasion of Ukraine by land, air and sea on Thursday, the biggest attack by one state against another in Europe since World War Two.
It supplies 10% of the world’s oil, a third of Europe’s gas and, together with Ukraine accounts for 29% of global wheat exports, 80% of sunflower oil exports and 19% of world corn exports.
Russia is the world’s largest supplier of palladium with a 40% market share. It accounts for 10% of global nickel supply and 6% of aluminium supplies.
Oil rose above $100 per barrel for the first time since 2014, UK and Dutch gas rose about 40%-50%, wheat jumped to a 9-1/2 year high, corn to an eight-month peak and aluminium soared to record highs.[NG/EU] [O/R] [GRA/]
In precious metals, palladium prices jumped to seven-month highs and gold climbed to a near 18-month peak as investors switched to safe-haven assets. [GOL/]
Western countries are set to unveil coordinated and tough sanctions on Russia on Thursday – with banks likely to be first in line.
“This raises the question of whether Russian energy shipments will also be hit by the sanctions. Two days ago the U.S. ruled this out,” Commerzbank analysts said.
“If sanctions affect payment transactions, Russian banks and possibly also the insurance that covers Russian oil and gas deliveries, supply outages cannot be excluded.”
Russia’s commodity exports could also be disrupted by buyers being unable open letters of credit from Western banks to cover purchases.
At least three major buyers of Russian oil have been unable to open letters of credit from Western banks to cover purchases on Thursday, four trading sources said.
However, Russia’s state gas monopoly Gazprom said supplies through Ukraine were normal and Ukraine said its energy infrastructure has not been damaged.
The movement of vessels on the Azov Sea was suspended although ports in the Black Sea, which account for most grain and oilseed exports, remained open.
Russia, Kazakhstan, Azerbaijan and Turkmenistan ship some 2-3 million barrels per day or 2%-3% of global supplies to markets via the Black Sea.
The Black Sea is also a conduit for metals such as aluminium produced by Rusal, the world’s largest producer outside China, accounting for 6% of global production.
“Metal prices can be heavily impacted by Western-imposed sanctions or Russian ‘weaponization’ of metal exports,” analysts at Natixis said.
Firms making goods from jet engines to semiconductors warned that supplies of key raw materials could suffer, while Danish brewer Carlsberg and a Coca-Cola bottler shut their plants in Ukraine.
(Reporting by Nina Chestney, Nigel Hunt and Pratima Desai; Writing by Dmitry Zhdannikov; Editing by Barbara Lewis and Lisa Shumaker)
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