Commodity prices spike on supply fears
The price of commodities including oil, gas, metal and wheat are soaring because of Russia's invasion of Ukraine.
“The global oil market is suffering what’s starting to look like the biggest disruption since the 1990-1991 Gulf War,” says Javier Blas on Bloomberg. Brent crude oil prices hit $110 a barrel early this week, their highest level since 2014, and other signs of strain are appearing. Russian oil usually trades at a few dollars discount to the Brent benchmark, but that has since widened to more than $18. Oil refineries are thought to be “self-sanctioning” – refusing to deal in Russian oil for fear of legal complications even if they are technically allowed to do so. That could see as much as two million barrels per day of Russian oil drop off world markets, worsening the existing shortage.
Meanwhile, Russian gas continues to flow to Europe through Ukrainian pipelines, says Adrien Pécout in Le Monde. At the outbreak of hostilities “the market anticipated that everything would suddenly cut off, then it calmed down, because the fundamentals of supply and demand are still there”, says Nicolas Leclerc of broker Omnegy. However, prices remain “very volatile”. European wholesale gas prices spiked towards €135 per megawatt hour last week but have since fallen to around €117, still short of December’s €188 record high.
Russia is also a “big supplier of aluminium and nickel, and produces about 40% of the world’s palladium”, says Jon Yeomans in The Sunday Times. That explains why aluminium hit a record high of $3,525 a tonne this week. Some other disruptions are more surprising: Ukraine, is a major supplier of “neon gas, used in microchips”. Russia is the world’s biggest wheat exporter, with Ukraine in fourth place. Wheat prices traded in Chicago are up 30% this year. Higher food prices are “certain to make day-to-day life harder for ordinary people across the world”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Hargreaves Lansdown bumps up cash ISA with £25 cashback - does it beat the wider ISA market?
Just days before the end of the tax year, Hargreaves Lansdown has launched a £25 bonus for those who open a cash ISA on its savings platform. Does the bonus make it a competitive rate, and are you eligible for the cashback?
By Vaishali Varu Published
-
FCA targets finfluencers with new social media guidance
So-called finfluencers have been warned by the UK financial watchdog that they could face prosecution if they fail to follow new rules.
By Henry Sandercock Published
-
What to consider before investing in small-cap indexes
Small-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
By Cris Sholto Heaton Published
-
Why space investments are the way to go for investors
Space investments will change our world beyond recognition, UK investors should take note
By Merryn Somerset Webb Published
-
Time to tap into Africa’s mobile money boom
Favourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
By Rupert Hargreaves Published
-
M&S is back in fashion: but how long can this success last?
M&S has exceeded expectations in the past few years, but can it keep up the momentum?
By Rupert Hargreaves Published
-
The end of China’s boom
Like the US, China too got fat on fake money. Now, China's doom is not far away.
By Bill Bonner Published
-
Magic mushrooms — an investment boom or doom?
Investing in these promising medical developments might see you embark on the trip of a lifetime.
By Bruce Packard Published
-
What pension providers don't tell you about your retirement money
Check the small print from your pension provider or risk losing thousands.
By Merryn Somerset Webb Published
-
Should you invest in sector funds?
Sector funds can be a useful way to fine-tune a portfolio or track a theme, but check what the index holds.
By Cris Sholto Heaton Published