Gas and aluminum hit fresh records; oil, wheat soar on supply turmoil

FILE PHOTO: Aluminum blocks are seen in Wagner Automotiv industry in Gradacac, Bosnia and Herzegovina February 8, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

LONDON/SINGAPORE — Commodity prices surged still higher on Thursday as Russia’s invasion of Ukraine disrupted global raw material flows, sending gas, coal, and aluminum to record peaks while crude oil and wheat scaled multi-year highs.

Russia’s stature as a top supplier in oil, gas, metals, and grain has meant that harsh sanctions applied to Russian entities following Moscow’s invasion of Ukraine have derailed critical resource supply chains.

“The invasion has upended the markets, supply chains are ceasing to work, which means we have dislocations all over the place,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

In just the past week since Russia launched its invasion, Dutch gas prices have more than doubled, Newcastle coal has surged by 85% and Brent crude oil has climbed by a fifth.

Analysts warned that soaring prices due to supply shocks from Russia and a rebounding economy in top commodity consumer China are likely to spur demand destruction in the short term.

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

Brent crude oil extended gains to almost $120 a barrel for the first time since 2012 following a fresh round of U.S. sanctions that target Russia’s oil refining sector. [O/R]

“Oil prices are likely to continue to climb – potentially beyond $130 per barrel,” said Rystad Energy CEO Jarand Rystad.

Dutch gas prices touched a record 199 euros/MWh while Newcastle coal futures have also been on a blistering run since sanctions were slapped on the third-largest exporter, surging to a record $440 a tonne this week.

Aluminum hits record

On metals markets, aluminum roared to another record peak, touching $3,699 a ton on the London Metal Exchange, while nickel surged 7.5% to its highest in 11 years.

Russia accounts for about 6% of the world’s aluminum and about 7% of global nickel mine supplies.

Precious metal palladium, for which Russia accounts for 40% of global output, jumped as much as 4.8% to nearly $2,800 an ounce, a fresh seven-month high.

Gold was barely steady, as safe-haven demand was eroded by worries about further interest rate rises that boost the opportunity cost of holding bullion.

In grains, Russia and Ukraine were projected to account for 28.5% of global wheat exports in 2021, according to the U.S. Department of Agriculture, so global wheat prices have jolted higher to try to accommodate a big drop in supplies from both counties.

Chicago wheat extended its surge to set another 14-year high, taking weekly gains to more than a quarter, as Russia’s invasion continued to fan fears of massive disruption to exports from the Black Sea region.

U.S. wheat futures gained as much as 6.5% to $11.09 a bushel.

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

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

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