The tension on the commodity markets fell a notch on Tuesday after the announcement of substantial progress in the talks between Russia and Ukraine. The barrel of Brent, the European benchmark for oil, fell 6.79% to 104.84 dollars. WTI, the American benchmark, for its part lost up to 7.1% and even fell briefly below the symbolic bar of 100 dollars. At the end of the day, however, the decline was limited to 1.6% for the two references. Brent returned to $109 and WTI to $102.
“There are growing hopes that talks between Russia and Ukraine will lead to a concrete agreement,” said Hans Van Cleef, chief energy economist at ABN Amro, quoted by Bloomberg. “In other words, the Russian offer might not be hit harder than the self-sanctions [que certains pays appliquent eux-mêmes, bien que les hydrocarbures ne soient pas visés par les sanctions internationales, NDLR] observed so far. “An easing of sanctions” is even possible, according to Hiroyuki Kikukawa of Nissan Securities, quoted by Reuters.
Lockdowns in China
This encouraging news amplified a downward trend that started a few days ago. Market operators have their eyes on China, which is facing one of the strongest waves of Covid since the start of the pandemic, to the point that the authorities have reconfigured the inhabitants of Shanghai, the economic capital of the former -Middle Kingdom.
Chinese demand, around 4% of global oil consumption, could fall in the coming months. According to calculations by Ehsan Khoman, an analyst at MUFG, the lockdowns in China could reduce global oil demand by up to 700,000 barrels per day in the second quarter. “The zero Covid policy in China relaxes, albeit involuntarily, the oil market”, analyzes Carsten Fritsch of Commerzbank.
The fall in prices also comes as OPEC and its allies – including Russia – prepare to meet. Producing countries should reopen the floodgates of crude a little more to normalize the market. The alliance should stay the course with an increase in quotas of around 400,000 barrels per day.
Relaxation on wheat
The de-escalation of the Russian-Ukrainian conflict has also led to a sharp drop in the prices of agricultural products. A bushel of corn in Chicago, about 25kg, fell as much as 4.8% to $7.19. Ukraine and Russia represent nearly 20% of world cereal exports.
On the Parisian futures market, a tonne of wheat fell 6% to 348 euros, before limiting its decline to 3%, to be charged just over 360 euros at the end of the day. The two countries account for 30% of world wheat exports and several million tonnes are still blocked in the ports of the Black Sea.
Metals followed the same trend. Aluminum, of which Russia is one of the main producers in the world, lost 5%, to 3,421 dollars per ton. The impact on nickel is more limited. The metal, which is used in the manufacture of stainless steel and batteries, yielded only 1.76%, to 32,180 dollars per ton.