With the West continuing to roll out tough sanctions against Russia, commodities markets can be expected to grow more amidst supply constraints. While logistic issues increase the cost for importers as they now have to ship certain commodities from afar, inventories are getting tighter as days go by. And that allows prices to spike even further from what they should.

Bans take their toll

The list of cultural bans grows – Russia is not going to Eurovision; kids cannot play with Legos anymore, and neither can they pick the Russian football team in EA Sport’s video games; the Bolshoi in Spain is no more.

Although, in most cases, it may look irrelevant to how commodities may do going forward, Russia can retaliate. Apart from retaliatory impact, with Volkswagen and Skoda also stopping trade with Russia, several metals shortages will add to the frenzy. The list will probably grow bigger.

Trade obscured

Even though most of the trade imports and exports have been halted, the relieving reality is that Russia has not switched the taps to their most significant exports yet- oil and natural gas. Europe is not the biggest importer of Russian exports, the USA is, and China comes second. But the EU imports the majority of its Crude, Petroleum Products and Natural Gas from Russia. It is why the crisis is affecting EU countries most, and already.

Gas prices have been going up

Europe’s gas supply relies heavily on Nord Stream 1, Yamal-Europe and Brotherhood pipelines coming from Russia. The EU imports account for 40% of its natural gas from Russia. Russia has built Nord Stream 2, supplying gas directly to Germany, but this has been allegedly put on hold since Russia’s invasions. However, Nord Stream 2 was halted way before the recent debacle, after the US and UK cited regulatory concerns. It’s kind of evident in its price as back in October of last year, it hit a high of $6.50 and has since succumbed. Some argue it’s the reason for Russia’s invasion of Ukraine. Since then, prices of natural gas have started to move higher. The commodity trades at $4.78 and is expected to reach $6.50 under normal circumstances. If Russia decided to retaliate, it might even soar up to $8, then $10.

Oil soars regardless

Apart from Europe’s oil imports that account for 60% of Russia’s exports, Russian exports account for nearly 12% of the global supply. Russia is the world’s largest exporter and the third-largest producer. US imports about 5% of Russian oil, while China gets 20%. China holds a neutral stance against the conflict, which means sanctions can come from the US and EU, or Russia may decide to cut off supply. But neither the US nor EU plan an embargo on oil as economies would collapse. Oil has hit a 14-year high at $118 and is poised to get to $120 following its correction. $137 is the next major resistance, and $150 is last if the situation remains unresolved.

What else moves?

It is not only energies that have pulled through a fantastic move. It’s nearly all commodities: wheat, iron, corn, aluminium, steel and others. Although Ukraine or Russia does not directly impact most, disruption in other markets has created a speculative frenzy unlikely to stop while the situation remains unchanged. Partially, it’s the reason why gold and other gems such as platinum moved as much. Some relate to safe-haven buying, some to exports – notably the UK’s imports of Russian metals, and some are bought because it’s a commodity. Benefit from price acceleration and deceleration now. Trade commodities with Amega here.

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