Commodity prices surge following attack on Europe’s largest nuclear plant

Commodity prices will likely continue to surge in coming weeks as predicted by various analysts. The Russia-Ukraine war and subsequent sanctions have continued to threaten supplies in an already tight market.

Commodity prices outlook

Earlier in the year, Goldman Sachs indicated that the commodity super cycle was just one year in and that it will likely last for about 10 years. With the ongoing Russia-Ukraine war, the investment bank has indicated that prices of  various products ranging from metals to crude oil and grains are set to soar higher to multi-year highs.

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Indeed, a look at the fundamentals and price charts of the aforementioned commodities points to further gains in the coming weeks. The ongoing Russia-Ukraine war has heightened concerns over supply shortages.

Tensions escalated on Friday after Russia attacked the largest nuclear plant in Europe, which is situated in Ukraine. At the same time, shipowners, financial institutions, and traders have continued to avoid transactions with Russia. This as the sanctions make it difficult to secure payments via the SWIFT international payment system. Besides, obtaining a vessel to ship cargo from the region is another major challenge.

Wheat Futures

Russia and Ukraine combined account for over 25% of the global output. According to the Bank of America, Ukraine and Russia accounts for 12% and 17% of the world’s wheat production respectively. As such, the ongoing war has heightened fears over supply constraints at a global level.

Wheat futures at the Chicago Board of Trade (CBOT) were trading at ‘limit up’ again, which indicates that it had risen by the highest amount allowed for a commodity’s price in one day. In the current week, it has traded at ‘limit up’ for two sessions.

At the time of writing, wheat price was at $12.09 per bushel. That is its highest level since February 2008. Since the beginning of the week, it has surged by about 36.30%.  

Notably, Ukraine and Russia are also key producers of corn. Earlier on Friday, CBOT corn futures rose to the highest level since October 2012 at $7.73 per bushel.

Crude oil Futures

The soaring of commodity prices is also observable in the energy sector. As traders continue to shun fuel from Russia, crude oil price has rallied to multi-year highs; a situation that has pushed the International Energy Agency to warn of a probable global energy insecurity.

On Thursday, WTI futures rose to the highest level since September 2008 at $116.46 per barrel. Granted, it has since pulled back to $109.96. At the same time, Brent futures – the benchmark for global oil- surged to a level last recorded in May 2012 at $119.72 before easing to the current $112.65.

Even with the pullback, analysts are extremely bullish of crude oil price. In a recent interview, the Director of Research at Energy Aspects – Amrita Sen –  indicated that Brent oil may rise further to and beyond $150 per barrel.  Besides, Goldman Sachs also adjusted its short-term forecast from $95 to $115 per barrel. In both cases, the analysts are of the opinion that demand destruction is the only solution to the current situation.

On Thursday, the LME Metals Index, which tracks six major contracts, rose to a record high amid the soaring energy prices. Aluminium, which is one of the energy-intensive metals, surged to a new record high of $3,850 per tonne. COMEX aluminum futures are also at an all-time high of $3,767.75.

Besides, copper price is at $4.85, which is close to the record high of $4.90 hit in May 2021. The Russia-Ukraine war and subsequent sanctions from Europe and the US have impacted supplies at a time when the global market was already tight.