Global Supply Chains hit by Russia Ukraine conflict

Date: Friday 25 February 2022

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The invasion of Ukraine by Russia has further impacted global supply chains.

Oil prices
Oil prices jumped, with Brent rising above $105 a barrel for the first time since 2014, after Russia's attack on Ukraine exacerbated concerns about disruptions to global energy supply.

"Russia is the third-largest oil producer and second-largest oil exporter. Given low inventories and dwindling spare capacity, the oil market cannot afford large supply disruptions," said UBS analyst Giovanni Staunovo in a Reuters article.

Global oil supplies remain tight as demand recovers from pandemic lows. “Supply concerns may also spur oil stockpiling activity, which supports prices.”

UK Petrol and energy prices
Average UK petrol and diesel prices have hit new highs as the crisis continues to affect oil prices, the RAC has said.

On Wednesday, petrol prices rose to 149.30p per litre amid warnings it could soon pass £1.50.

Wholesale gas prices also continue to climb, threatening to further push up heating bills.

The UK only gets 6% of its crude oil and 5% of its gas from Russia, but there are concerns sanctions could constrict supplies and drive up prices worldwide.

UK consumers are already paying a high price for energy and fuel, with demand surging following the easing of Covid restrictions.

Precious metal prices
The conflict is also having a massive impact on the precious metal markets, including those used in products such as catalytic converters.

Russia is one of two major palladium producers in the world and tightening of sanctions could result in restricted availability. A firmer US dollar, as is typical in times of crisis aggravates price increases in the euro area.

Should the sanctions be tightened, the old high of USD 3,000/oz should come back into sight for palladium. Due to the prevailing market deficits over the last couple of years remaining inventories are limited.

Rhodium has already seen an upward movement in the past few days, which is continuing due to the aggravated situation. Although Russia is only a small producer, in a tense market even minor shortfalls can have a significant impact on prices. The rhodium price is trading above the USD 20,000/oz mark. For silver and platinum, we anticipate rather moderate gains.

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