Oil calms down, commodities continue to bullish

Two oil rigs off the coast of California, October 6, 2021. (Frederic J. BROWN/AFP/Archives)

Oil prices tumbled on Thursday after skyrocketing to a record level since 2008, while metals or agricultural inputs, of which Russia is the main producer, continued a frenzied race due to supply uncertainties caused by the invasion of Ukraine.

A barrel of Brent crude from the North Sea, Europe’s benchmark of crude oil, rose to $119.84, breaking the $120 threshold that has not been reached since 2012. Around 17:00 GMT, the price dropped again to $112.76. 0.1%.

West Texas Intermediate (WTI) in New York, meanwhile, rose to $116.57, a new high since September 2008, before falling to $110.01, down 0.53%.

“Market speculation, fueled by Iranian sources” such as journalist Reza Zandi, “about an agreement with Iran in the coming days” has led to a drop in oil prices, said Giovanni Staunovo, an analyst at UBS bank, interviewed by AFP.

The Iranian oil journalist tweeted on Thursday that he had received “information that a nuclear deal would be signed in Vienna in the next 72 hours,” which he said was a prelude to the return of Iranian oil to the world market.

The next few days are seen by Westerners as pivotal to the ongoing talks in Vienna between the major powers and Iran to restart the JCPOA, a 2015 pact between Iran on the one hand, the United States, China, France, the United States. Kingdom, Russia and Germany on the other.

The spike in prices early in the session and in recent days was fueled by the war in Ukraine, which continues to escalate, and a “risk premium” on oil supplies from the Russian giant, amplified by a “speculative position adjustment,” says Tamas Vargas, an analyst at PVM.

A square in Kharkiv, Ukraine's second largest city, on March 2, 2022.
A square in Kharkiv, the second city of Ukraine, on March 2, 2022. (Sergey BOBOK / AFP)

Russian President Vladimir Putin said on Thursday that he is determined to continue the offensive against Ukraine “without compromise” and Russian troops are shelling several strategic cities despite the start of new talks between Kiev and Moscow.

“Although Western sanctions have not gone so far as to ban Russian exports, the supply of crude oil and petroleum products to the country has clearly been affected,” not least “as financial sanctions make it impossible to buy oil from Russia,” Vargas said.

– Tension in the energy supply –

Western companies are “punishing themselves” by no longer buying Russian oil and “preferring to find other solutions because the risk of sanctions increases in proportion to the intensity of the war in Ukraine,” said Ipek Ozkardeskaya, an analyst at Swissquote bank.

“Alienating” and “reducing the impact on Russian oil,” which would make it easier for the West to impose sanctions on Russian energy if those already imposed on Moscow “do not stop Russia in its offensive,” the analyst explains.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Wednesday decided to stick with the gradual reopening of the floodgates despite the sharp rise in prices.

The International Energy Agency (IEA) called the stance “disappointing”, adding that it could release more barrels from its strategic reserves after having already used up 60 million barrels.

Natural gas also rose, with the Dutch TTF reaching a record level of €199,990 per megawatt hour (MWh). Russia accounts for more than 40% of the annual natural gas imports to the European Union. British gas, for its part, was close to its all-time high in December last year.

– Mad race for raw materials –

Other raw materials, the main producer of which is Russia, also remained in an upward spiral.

Aluminium, coal hit new records and wheat reached its highest level in 14 years. Russia and Ukraine account for 30% of world wheat trade.

Aluminum ingots at a factory in Huaibei, China, February 9, 2022.
Aluminum ingots at a factory in Huaibei, China, February 9, 2022 (STR/AFP/Archive)

A tonne of aluminum hit $3,755 on the London Metal Exchange (LME) on Thursday, a new all-time high, with nickel climbing to $27,976 a tonne, an eleven-year high.

The LME index, which includes the prices of aluminium, copper, lead, nickel, tin and zinc traded on the LME, hit an all-time high of 5,046.7 on Wednesday, up more than 30% year-on-year, signaling a rise in prices for industrial metals.