LONDON: Commodity prices surged on Tuesday with Brent crude soaring on news that the United States and Britain will ban or phase out Russian oil imports, and nickel hitting record highs above US$100,000 a tonne.
The London Metal Exchange (LME) suspended nickel CMNI3 trading on all venues after prices jumped nearly 400% from Friday's close. The exchange said market uncertainty made it inappropriate to announce a date to resume trading, but it was unlikely before March 11. [nFWN2VA12G] Read full story
"Nickel is clearly trading in crisis mode," ING analysts said. "Fundamentals, though supportive of stronger prices, do not justify this frenzy." The market has long faced structural issues, they added.
Gold XAU= extended its blistering rally towards an all-time high, while worries over a palladium supply shortfall due to sanctions on Russia, the top producer of the auto-catalyst metal, kept its price near all-time highs. GOL/
Brent crude LCOc1 settled up 4% near $128 a barrel. O/RRead full story
Russia is the world's largest exporter of natural gas and the second largest exporter of crude oil and petroleum products.
It supplies more than a third of Europe's energy and is also a major producer of fertilizer, wheat, aluminium, nickel, palladium, platinum and coal.
Western sanctions have cut Russia off from international trade and financial markets to a degree never before imposed on such a big economy. Read full story
U.S. President Joe Biden announced a U.S. ban on Russian oil and other energy imports, ramping up a pressure campaign on Moscow in retaliation for the invasion of Ukraine. Read full story
Britain said it would phase out imports of Russian oil and oil products by the end of 2022, which it said would give the market and businesses more than enough time to find alternatives to the imports, which make up 8% of demand. Read full story
Oil major Shell SHEL.L has stopped buying Russian crude and said it would phase out its involvement in Russian hydrocarbons from oil to natural gas, becoming one of the first major Western oil companies to abandon Russia entirely. Read full story
Goldman Sachs hiked its price forecasts for Brent oil saying the world could be facing one of "largest energy supply shocks ever" because of the Ukraine crisis, while Barclays said prices in its worst-case scenario could top $200 a barrel. Read full story
VOLATILITY
Global gas markets remained volatile after hitting record highs on Monday. Analysts said an embargo on Russian gas exports seems unlikely but Russia has threatened to retaliate for Western sanctions by halting flows through the Nord Stream 1 pipeline. Read full story
Russian gas delivered through the Yamal-Europe pipeline via Poland was flowing westward into Germany on Tuesday, and flows into Slovakia via Ukraine remained at recent high levels, pipeline operator data showed.
The European Commission published plans on Tuesday to cut EU dependency on Russian gas by two-thirds this year and end its reliance on Russian supplies of the fuel "well before 2030".
Meanwhile, Chicago Board of Trade (CBOT) wheat Wv1 futures temporarily dropped by expanded exchange-imposed limits in volatile trading after touching a 14-year high. The market is wrestling with a supply upheaval following Russia's invasion of Ukraine, a fellow grain exporter. GRA/
Russian President Vladimir Putin signed a decree restricting the import and export of certain goods and raw materials "to ensure the security of the Russian Federation", Interfax news agency said. It did not specify which products would be restricted.Read full story
Many shipping companies have suspended sailings to affected ports on the Black Sea due to the conflict and the impact of Western sanctions, adding to pressures for traders in Russian and Ukrainian grain.
But CBOT soybean Sv1 futures were strong, rising 2% on demand for U.S. exports and the gains in crude oil.
Reuters also reported:
Oil prices settled around 4% higher on Tuesday as the United States banned Russian oil imports and Britain said it will phase them out by year end, decisions that are expected to further disrupt the global energy market as Russia is the second-largest exporter of crude.
Oil prices have surged more than 30% since Russia invaded Ukraine, and the United States and other countries imposed a raft of sanctions. The sanctions had already upended Russian oil and gas exports even before the ban, as traders sought to avoid running afoul of future sanctions.
U.S. President Joe Biden announced a ban on Russian oil and other energy imports. Britain said it will phase out the import of Russian oil and oil products by the end of 2022, giving the market and businesses time to find alternatives. Read full story
Brent crude LCOc1 futures settled at $127.98 a barrel, 3.9% higher, while U.S. crude futures CLc1 settled at $123.70 a barrel, a 3.60% increase.
Russia ships 7 million to 8 million barrels per day of crude and fuel to global markets.
The United States imports very little oil from Russia, yet the ban is "one more source of supply loss," said Matt Smith, lead oil analyst at Kpler.
"It's just one more escalation in a series of events that have pushed crude and product prices higher," Smith added.
The import bans could send global oil prices up to $200 a barrel, analysts at Oslo-based consultancy Rystad Energy said. Before the U.S. ban was announced, Goldman Sachs had raised its Brent forecast for 2022 to $135 from $98 and its 2023 outlook to $115 a barrel from $105, saying the world economy could face the "largest energy supply shocks ever" because of Russia's key role. Read full story
"How high can oil prices go? Pick a number, this is a market in disarray," Mike Tran, analyst at RBC Capital Markets, said in a note early on Tuesday.
Many buyers were already avoiding Russian oil. Shell PLC SHEL.L said it would stop all spot purchases of Russian crude after drawing criticism for a purchase made on March 4. Read full storyRead full story
Some market watchers said oil's rally was overdone, and crude briefly gave up most gains around an hour before settlement. Traders attributed the retreat to reports about Ukrainian President Volodymyr Zelensky no longer pressing for NATO membership.
Ukraine's pursuit of a NATO membership has been a key point of contention in negotiations with Russia. Read full story
Dimming expectations for an imminent return of Iranian crude to global markets have added upward pressure on prices as talks have slowed down between Tehran and world powers. Read full story
Supply disruptions come as inventories continue to fall worldwide. Five analysts polled by Reuters estimated on average that U.S. crude stockpiles decreased by about 700,000 barrels in the week to March 4.
The poll was conducted before weekly inventory reports from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday.
Media reports about the International Energy Agency's readiness to release more oil from emergency stockpiles had no impact on the rally.
"Ultimately, the IEA is not announcing significant action," said Craig Erlam, senior market analyst at OANDA. "In this market, words are not going to have an impact."
- Reuters
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