What raw materials may be affected by the escalation of the conflict between Russia and Ukraine

What raw materials may be affected by the escalation of the conflict between Russia and Ukraine

Russia pumps around 9 million barrels of crude oil a day. The United States, by comparison, produces about 11.6 million barrels. Daily world oil production amounts to about 78 million barrels, according to data from Bloomberg. The international reference prices for crude oil have risen by more than 20% so far this year and a Russian intervention in Ukraine would undoubtedly trigger the price due to the rise in demand with a stagnant supply. This would undoubtedly impact the price of fuel in the world.

The crisis “could generate a butterfly effect, pushing up commodity prices as supply problems multiply,” analysts at Bloomberg Intelligence wrote. “Sanctions could usher in food and energy shortages, causing prices of both to skyrocket.”

The uncertainty with Ukraine means that the price wheel does not stop turning. The price of oil is paid in anticipation of what is expected to happen. As the forecasts with Russia are not good, many buyers decide to keep their options waiting for the final price to exceed them and they can come out ahead. It is not clear that oil will reach $150, but it is heading there and there are already some investors who have put that level in their futures options.

Globe_UkraineRussia_1080.jpg

Gas

European natural gas prices are actually down 26%, but spiked in late December and are up 125% in the last 6 months, according to World Bank data.

“Russia produced around 639,000 million cubic meters of natural gas in 2021, according to BP data, so the world production of natural gas reached around 3,854 billion cubic meters and prices will be pushed up with military intervention. in the Ukrainian countryindicate the experts of Atlantic Capital.

Amid a context of possible sanctions, Russia confirmed that it will maintain the uninterrupted supply of natural gas to world markets. Europe secures 40% of its gas needs from Russia and was studying the approval of the recently built Nord Stream 2 submarine gas pipeline, which connects Russia with Germany. Germany, Russia’s main gas consumer and until recently a key energy partner in Europe, put the certification of the Nord Stream 2 pipeline on hold in response to Russia’s actions in eastern Ukraine. EU foreign ministers will meet later on Tuesday to discuss a four-part sanctions package on Russia, a European Commission source told Reuters.

European financing partners of Nord Stream 2 could go to court if sanctions are imposed on the $11 billion project, Russian Energy Minister Nikolai Shulginov told Energy Intelligence on Tuesday. Gazprom did not respond to a request for comment and the Nord Stream 2 consortium declined to comment.

“A complete suspension of gas exports remains the least likely scenario, as it would carry serious long-term risks to Russia’s financial stability and political influence in Europe, as the EU would likely respond by aggressively diversifying its energy supplies.” , assured analysts at Eurasia Group.

Grain

Russia and Ukraine account for about 29% of world wheat exports, 19% of world maize supply, and 80% of world sunflower oil exports. In this way, concern is growing about the impact on crops and a struggle by importers to replace supplies. The price increase is fueled by fears of possible disruption to trade in the Black Sea as the geopolitical crisis deepens.

The three key food ingredients are up around 40% from 2021 lows, driven by declining global production and strong demand. So far shipments are still flowing freely with no signs of disruption. But if that were to happen, global markets already grappling with shrinking grain stocks could experience further deficits.

“Wheat has potentially huge upside volatility ahead of a possible invasion of Ukraine,” Rabobank analysts said in a report this week. Russia is also one of the world’s largest exporters of the three main groups of fertilizers. Any cut in supply could cause an increase in already high nutrient prices, hurting business returns and leading to further food inflation.

metals

Traders are also weighing the risk of disruption to Russian exports of metals, including aluminium, nickel, palladium and steel, even as analysts stress that targeting Russian producers directly with sanctions would be a major target for the West. US sanctions against United Co. Rusal caused turmoil in the aluminum market in 2018, and banks like Goldman Sachs Group Inc. say their unlikely policymakers will want to risk a repeat of the same scenario.

But if Russia is cut off from the Swift international payment system as part of any sanctions, it would slow the flow of funds and hit exports. Any disruption to gas flows could also exacerbate problems for metal producers in Europe that have been cutting output in response to high energy prices.

Even short-lived outages could have a huge impact at a time when manufacturers are already facing critical shortages of metals, from aluminum to zinc. The consequences could be particularly dramatic in the palladium market, where Russia accounts for around 40% of the world’s supply.

The country is less dominant in base metals, but remains one of the world’s leading suppliers. Regarding nickel and aluminum, they hit multi-year highs on Tuesday, raising fears that a war and sanctions against Moscow could disrupt Russian exports. Russia produces about 6% of the world’s aluminum and 7% of the nickel mined.

Even with Russian exports flowing, both metals are in short supply, said Wenyu Yao, an analyst at ING. Before this crisis between Russia and Ukraine escalated, they were already seeing very strong fundamentals,” he stated.

The United States and its European allies will announce new sanctions against Russia on Tuesday. Western countries are unlikely to impose blanket sanctions on Russia as high aluminum prices would hurt the manufacturing sector, analysts say.

Source: Ambito

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts