The commodities feed: Russia-Ukraine escalation

ING Global Economics Team ING Economic and Financial Analysis

Brent settled flat yesterday despite rising tension between Russia and Ukraine. Developments related to Iran’s nuclear program likely countered some of the geopolitical risk.

Energy – Iran counters Russia-Ukraine geopolitical risk

Despite an escalation in the Russia-Ukraine war, there has been limited impact on oil prices. ICE Brent settled almost flat yesterday, even after Ukraine fired a US-made long-range missile into Russia for the first time. At the same time, Russia also updated its nuclear doctrine, widening the scope for the use of atomic weapons.

Eating into some of the geopolitical risks related to Russia-Ukraine were reports that Iran offered to stop increasing its stockpiles of uranium enriched up to 60%. The International Atomic Energy Agency has said Iran has taken the first steps to cap production. If this occurs, it removes some supply risks related to Iranian oil when President-elect Trump enters office.

In the North Sea, the Johan Sverdrup field has resumed operations after a power outage led to a halt in production on Monday. The field produces around 755k b/d but will take some time to return to full capacity.

Numbers from the API overnight show that US crude oil inventories increased by 4.8m barrels over the last week, compared to expectations for a marginal draw. For refined products, gasoline and distillate stocks fell by 2.5m barrels and 700k barrels respectively. The more widely followed EIA report will be released today.

Metals – LME lead stocks surge

LME lead stockpiles surged to the highest level since 2013 yesterday after a second consecutive day of big inflows into the exchange’s sheds in Singapore. Singapore now accounts for 98% of LME lead inventories. Total LME inventories jumped by more than 49% in the last two days alone. Lead is one of the worst performers on the LME this year, with prices down around 3% year-to-date and weak auto sales weighing on demand for the battery metal. The global lead market is set to see another surplus this year. The global supply of refined lead will exceed demand by 40,000 tonnes in 2024, according to the International Lead and Zinc Study Group (ILZSG).

The latest LME COTR report released yesterday shows that investors decreased their net bullish position in copper by 10,315 lots to 58,398 lots for the week ending 15 November. This is the lowest net long since 19 January 2024. Similarly, net bullish bets for zinc fell by 2,737 lots to 27,072 lots, the lowest since the week ending 6 September 2024.

Agriculture – Wheat surges on Russia-Ukraine tensions

CBOT wheat futures extended their upward rally, settling 2% higher yesterday. This followed rising tension between Russia and Ukraine and renewed threats of supply disruptions.

Weekly data from the European Commission shows that EU soft-wheat exports for the 2024/25 season dropped to 8.8mt as of 17 November, down 31% YoY. Rising competition from Russia and a poor harvest in France has weighed on export volumes. Meanwhile, EU corn imports stand at 7.6mt, up 11% YoY and are due to weaker domestic supply this season.

Read the original analysis: The commodities feed: Russia-Ukraine escalation

Author

ING Global Economics Team

ING Economic and Financial Analysis

From Trump to trade, FX to Brexit, ING’s global economists have it covered. Go to ING.com/THINK to stay a step ahead.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.