Research Briefing

Russian invasion of Ukraine drives prices higher

The Russian invasion of Ukraine has clouded the outlook for commodity markets. Both countries are important commodity producers, and there is a risk of supply disruption during a period of market tightness, which could send prices higher. So far, no sanctions have been placed on commodities exports from Russia, but the financial sanctions will make it harder to conduct transactions for Russian commodities. Furthermore, the fear over future sanctions are keeping some traders away from Russian commodities, widening the differentials with global benchmarks.

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  • European natural gas prices have seesawed over the past week amid this uncertainty. Prices skyrocketed on Thursday, reaching $43/MMBtu before declining to $27 on Friday.
  • Brent oil has surged to its highest level since 2014. Already tight market conditions and low spare capacity elsewhere have meant markets are especially sensitive to such news.
  • Meanwhile aluminium prices rose again last week and have continued to climb this morning.

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