Volatility remains at high levels across all commodity markets, with oil and metals leading the way thanks to the continuing Russian invasion of Ukraine and the still growing sanctions against President Putin’s regime and its key business figures.
Friday saw a mixed end to a topsy turvy week with big rises and big falls and a degree of unhinged momentum at times.
Even the Fed rate rise this week is not being seen as a negative – commodity markets remain especially (understandably so) sensitive to developments related to the Russian war in Ukraine.
Hints from Vladimir Putin, who sees progress in talks with the Ukrainian government and is reportedly willing to compromise on neutrality, caused prices to ease as the two global benchmarks, Brent and WTI, ended lower at $US112 and $US109 respectively.
But Putin is a notorious liar and prevaricator and western investors have been taken in before by him – the widening of the Russian assaults in Ukraine on Friday while he talking about a ceasefire has exposed Putin’s claims as the lies they were. More towns and cities shelled and hit by rockets and more civilian deaths.
Because of Russian intransigence, the recent optimism about the Iranian nuclear deal has weakened.
While the negotiations seemed to be on the verge of success until a few days ago, the talks have now been suspended because Russians are resisting a deal that would see more Iranian oil on the market which in turn would depress demand for the unwanted crude Russia is now being forced to stockpile or shut in.
The moves came amid another day of higher energy prices. US West Texas Intermediate crude, rose 2.9% to around $US109 a barrel, while the international marker, Brent crude moved 2.9% higher to around $US112.
Crude prices ended well off the highs seen earlier (over $US139 a barrel for Brent) in the week and both WTI and Brent ended down more than 5%.
The weekly Baker Hughes survey of rig use in the US showed another rise – up 13 overall to 663 units and for oil only, up 8 to 527.
It was the 9th week in the past 10 that rig numbers have risen and there is now a clear increase in the past month in particular – close to 40.
US daily production has been around 11.6 million barrels a day for months now, even though rig numbers have risen sharply.
Metals prices except for copper fell sharply. Palladium futures tumbled 4% to $US2,803.50 an ounce.
Comex gold ended under $US2,000 an ounce and settled at $US1,985 (it rose to $US1,992 in afterhours trading).
Gold rose 0.9% for the week silver was up 1.26% at $US26.10 and Comex copper dropped more than 6% to $US4.61 a pound.
Also limiting gold was the anticipation of a rate hike by the US Fed this week.
With US consumer price inflation surging to 7.9% in February (but not in China where it was steady at 0.9%), the central bank will raise its benchmark overnight interest rate by at least 25 basis points on March 16.
That rise and the boost to the value of the greenback is usually a negative for US dollar traded commodity prices like oil, gold, copper and nickel.
Agricultural commodity prices turned mixed – wheat fell for most of the week – and bond yields were mostly higher, and ended the week above 2% for the key 10-year US Treasury bond.
