The dust appears to have settled after the weekend turmoil in Russia. Oil and gas prices rose on Monday, while wheat prices jumped briefly in response to the short-lived incident, before falling steadily. Most markets appear to be recovering from the incident. It is worth considering how the situation in Russia may affect the quotations of major commodities?
Is Europe further dependent on Russia?
It appears that the situation in Russia could further deteriorate relations between the country and the Western world. Particularly now that the European Union is introducing an eleventh series of sanctions measures to strengthen and tighten the existing ones, which is expected to help weaken the country. If we look at the most recent data, the value of Russia's exports has fallen to pre-conflict levels, and this decline is mainly due to a drop in commodity prices.
Source: https://www.bruegel.org/dataset/russian-foreign-trade-tracker
However, it cannot be denied that Europe's share of purchases of Russian fuel raw materials fell from 47% to 17% during the year. As a result, the impact of the conflict in Ukraine on fuel raw material quotations may be diminishing. The increasing share of energy raw material sales to Asian countries, particularly China (up to 35%) and India (up to 18%), seems to show that extracted raw materials will always find an end customer, regardless of their origin. For this reason, as long as Russia continues to extract raw materials, it can count on selling them.
Source: https://www.bruegel.org/dataset/russian-foreign-trade-tracker
Is the current status quo on commodities suspect?
If we look at global commodity quotes, we can see that after the weekend's attempted putsch in Russia, the largest volatility was within 5% in natural gas quotes, which ended with a 2% decline. On the main energy commodities, we saw neither increased volatility nor a change in the current sideways trend. This could mean that the impact of the situation in Russia is having less and less of an impact on global commodity quotations.
Source: Conotoxia MT5, XNGUSD, Daily
Source: Conotoxia MT5, XBRUSD, Daily
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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