Oil will again dominate commodity markets this week as major oil exporter Russia continues to ride the price boost it is driving with its threats to European and global stability by pressuring Ukraine.
Russia’s antics, which are helping boost the prices of other commodities (and boosting import costs for China, President Putin’s newest bestie at the same time) saw the US issue its most serious warning on Friday (early Saturday, Australian time).
With about 2 hours left to the trading day, US National Security Advisor Jake Sullivan said at a White House briefing that there were signs of Russian escalation at the Ukraine border and that it was possible that an invasion could take place during the Olympics.
“We continue to see signs of Russian escalation, including new forces arriving at the Ukrainian border. As we’ve said before, we are in the window when an invasion could begin at any time,” Sullivan said Friday.
That saw the West Texas Intermediate, the US oil benchmark, jump more than 5% to hit $US94.66 a barrel, its highest level since September 30, 2014. The contract eased a bit into the close, however, ending the day 3.6% higher at $US93.90 per barrel.
Brent crude, the global marker rose 3.3% to settle at $US94.44 per barrel, but rose in afterhours trading to end at $US95.22 a barrel.
$US100 a barrel doesn’t seem too far away.
WTI ended the week up 2.1% and Brent, 2.9% as Friday’s late surge wiped out what was shaping up as a loss for the week.
Hidden by the news story about the US warning was significant news from the US production sector – the biggest rise in new oil rig use in the US for four years – a sure sign that American production will surge later this year.
Oil services group Baker Hughes said US energy firms in fact had added the most oil rigs in a week since early 2018.
Oil-directed rigs rose 19 to 516, while gas-directed rigs were up by 2 to 118. Miscellaneous rigs numbers rose by 1 (water drilling usually).
The total rig count of 635 was up 238, or 60%, over this time last year and at its highest since April 2020.
The surge in prices well past $US80 a barrel seems to have driven the sharp rise.
US weekly production of crude oil rose last week, breaking its recent downward trend. Crude production for the week ending February 4 rose 100,000 bpd to 11.6 million bpd, according to the US Energy Information Administration. That where it was for most of the final weeks of 2021.
The latest US comments on Russia swamped the warning from the International Energy Agency which said prices could get a higher kick from weak production growth from the OPEC + group (which includes Russia).
The IEA said that Saudi Arabia and the United Arab Emirates could help to calm volatile oil markets if they pumped more crude, adding that the OPEC+ group had produced 900,000 barrels day (bpd) below target in January.
The IEA says the Saudis and UAE have the most excess production capacity and could help to relieve dwindling global oil inventories that have helped push prices towards $US100 a barrel, boosting global inflation pressures inflation worldwide.
The IEA also raised its 2022 demand forecast by 800,000 bpd based on revisions to historical data. It expects global demand to expand by 3.2 million bpd this year reaching an all-time record 100.6 million bpd.
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The White House warning about a possible Russian attack breathed new life into a gold price that had sagged in the wake of the higher than forecast US consumer inflation news on Thursday.
The 7.5% annual rate for the CPI saw US interest rates spike higher to over 2% for the 10-year bond as the US dollar rose – both of which are actually major negatives for precious metals, especially gold.
Gold, though, attracts more interest from investors at times of global political and financial stress and it’s the former we have now with the aggressive antics of Russia and its bullyboy President Putin in the pressure on Ukraine.
The US warning saw Comex gold end higher on Friday as bond yields fell back under 2% and the US dollar strengthened after the President Biden told NATO and European Union leaders the United States believes Russia will go ahead with an invasion in the next few days.
Gold for April delivery closed up $US4.70 to settle at $US$1,842.10 an ounce. Gold prices continued to rise strongly metal in post-settlement trading and was last seen up $US23.20 to $US1,860.60 an ounce.
The US dollar rose sharply, making gold more expensive for international buyers.
The ICE dollar index was last seen up 0.51 points to 96.05. Bond yields were lower with the yield on the US 10-year note down 11 basis points to 1.91% from more than 2.2% in the wake of the inflation data the day before.
Comex silver also rose after hours, ending at $US23.36 an ounce, rising strongly in electronic trading to be 3.96% over the week.
And Comex copper ended at just over $US4.50 a pound (it rose above $US4.60 a pound earlier in the week) to be up 0.50% for the week.
