EUROPEAN COMMODITIES UPDATE: Oil and gold soars as geopolitical tensions escalate

Analysis details (09:45)

WTI and Brent futures have soared in a market dictated by geopolitics following Russia President Putin’s announcement of a move further into Ukraine. Brent prices have climbed above USD 100/bbl to a current high at 103.75/bbl (vs low 97.05/bbl) – hitting levels last seen in 2014, whilst the UK and European Nat gas prices rose over 30% apiece. Meanwhile, Brent six-month backwardation hit a new record high of over USD 11.50/bbl. Russia holds over 30% market share in Europe for both natural gas and oil. Meanwhile, following Germany’s decision to halt the Nord Stream 2 certification, FT sources close to Kremlin and Gazprom have suggested that Russia is confident that it can withstand Germany’s decision to halt the gas pipeline certification. Elsewhere, an Iranian official said if US sanctions were lifted, it could boost its oil output to 4mln BPD from 2.5mln in about three months, according to Energy Intelligence. In metals, haven demand has bolstered spot gold and silver prices, with the yellow metal rising rose from around USD 1,914/oz to USD 1,949/oz shortly after President Putin’s announcement, while spot silver reclaimed a USD 25/oz handle. Elsewhere, LME aluminium surpassed its 2008 peak to reach fresh record highs. Russia holds a significant market share of total exports in nickel (~49%), palladium (~42%), aluminium (~26%), and platinum (~13%), whilst it also exports steel (~7%) and copper (~4%). A supply disruption will naturally lead to higher prices. Some desks however argue that sanctions would be more detrimental to the global economy given how integrated the above metals are to everyday goods, whilst a rush to stockpiles will further aggravate the ongoing supply chain problems.

24 Feb 2022 - 09:44- EnergyResearch Sheet- Source: Newsquawk