Commodities, especially oil, took a bit of a breather on Friday as Russia’s provocations on the border with Ukraine continued.
With the highly liquid US markets closed today (for Presidents Day), many oil traders pulled back a little on Friday and went into US bonds or cash in case Putin stepped up his aggression and rising talk of Iran and the US doing a nuclear control deal on the weekend.
The tense situation with Moscow had driven oil prices higher because of concerns that any retaliatory sanctions from the US could limit Russian oil on the market.
US West Texas Intermediate futures rose above $US95 a barrel early the past week for the first time in seven years. But by Friday, the price retreated to about $US91.66 at the close. Brent crude peaked above $US96.70 a barrel early in the week and finished Friday around $US93.61.
The oil market reacted more to reports that the US and Iranians were on the verge of a deal to resurrect a nuclear agreement that President Trump abandoned.
Capital Economics analysts said earlier in the week that crude oil and natural gas prices would surge if the conflict in Ukraine escalated “Even if they fall back relatively quickly as the dust settles.”
Each “sustained” $US10 increase in the price of oil per barrel adds about 0.3 percentage points to the overall US consumer price index (on a year-over-year basis), according to analysts at Oxford Economics.
“The largest impact of higher oil prices is on consumer price inflation and it adds further to the pressure for the Fed to be more aggressive,” Kathy Bostjancic, chief US financial economist at Oxford Economics, said in comments to Reuters.
(Oil and petrol prices were the biggest boosts to the Australian consumer and producer inflation raises in 2021.)
Rising oil prices are already driving cost rises for businesses and drivers. The national US average petrol price is just under $US3.50 a gallon, according to the US automobile group, the AAA. That is up nearly 20 cents in the past month and almost $US1 a gallon over the past year.
The number of oil rigs operating in the US rose by four last week, according to Baker Hughes, the oil services group. That was a sharp fall from the 19 extra rigs the week before.
The count rose to 520 by Friday, Baker Hughes said. A year earlier, the US had 305 oil rigs in operation.
In total oil and gas rigs in the US rose by 10 to 645 with more gas rigs being brought into use than oil rigs for the first time in more than a year.
Gas was up six rigs at 124 and miscellaneous rigs remained at one this week. In the same period of 2021, there were 91 gas rigs and one miscellaneous rig in operation. Overall, there were 397 rigs operating a year ago.
Brent crude lost just over 1.5% last week and US crude fell 3.5%. Russia’s increasingly aggressive tactics around Ukraine in fact dampened price pressures last week.
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Gold kept itself in the spotlight, taking advantage of its safe haven status.
The price of Comex traded metal to briefly top $US1,900 an ounce. It fell back under that level on Friday as the US dollar rose.
Gold settled at $US1,899.80 but then rose back over $US1,900 to end afterhours trading at $US1,900.80 an ounce.
Comex gold added more than 3.1% over the week as that safe haven status attraction grew as the news about Putin’s aggression worsened.
Comex silver traded around $US 24 an ounce, ending at $US23.91 for a gain of more than 2.6% for the week.
And Comex copper added 1.7% for the week (after Friday’s small dip) to close at $US4.514 a pound.
