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(Bloomberg) — Commodities are coming off the back of a historic week marked by extraordinary turbulence driven by Russia’s invasion of Ukraine. With base metals hitting records, crude oil at a multiyear high, and crops punching upward, there’s more drama to come in the coming days.

The principal concerns for investors will be events on the ground as Russia presses home its attacks, and the complicated fallout from sanctions that’s playing out for traders, shippers, and users of raw materials. Right now, the commodity complex has advanced to never-seen-before levels.

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On the diary, the stand-out event will be CERAWeek in Houston, where the biggest names in energy — from Exxon Mobil Corp.’s Chief Executive Officer Darren Woods to Saudi Energy Minister Prince Abdulaziz bin Salman — will assess the global turmoil and offer perspectives on what is to come.

High Anxiety 

Is the world heading for another energy crisis? That’s the concern underlying much of the commentary this week as oil, gas and coal surged. Brent hit almost $120 a barrel, and there are plenty of forecasts for more gains — especially with OPEC+ reluctant to pump faster. JPMorgan & Chase Co. says Brent could end the year at $185, far above the record set in 2008.

Even as conflict rages in Ukraine, investors will be looking to Iran, with talks to revive that nation’s nuclear deal in the balance this weekend. An agreement between Tehran and world powers could pave for the lifting of U.S. sanctions on Iranian crude flows, potentially bringing some relief to a very tight market.

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Wheat Woes

If the situation in energy looks dire, agricultural markets offer an even more somber canvas. Given Ukraine and Russia had a massive hold on grain supplies before conflict erupted, it’s not yet clear when disruptions will ease given the shipping chaos in the Black Sea. Citigroup Inc. sees a “shock” for prices.

Take wheat, the biggest gainer among commodities this week. The Ukraine war has affected about a quarter of global exports, sending prices to their highest since 2008 and triggering wild moves in options. There’s a similar story across corn, barley and sunflower oil — all of which Ukraine produces in abundance. 

Hot Metals

Metals were in the midst of a long rally even before President Vladimir Putin ordered troops to Ukraine. Russia is a significant producer of nickel, aluminum, copper and palladium, among others. Much depends on whether materials still manage to keep flowing from the country in the coming weeks and months.  

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As is stands, there’s likely to be more price gains. Copper — after underperforming its peers — is once again close to a record, while aluminum rallying to an unprecedented $4,000 a ton looks to be only a matter of time. Any further spike in energy is likely to supercharge metals by forcing output cuts at smelters. If that scenario unfolds, European producers are most at risk.

Golden Opportunity

Gold jumped early Friday after reports that Russian forces were shelling Europe’s biggest nuclear plant in Ukraine. While that panic subsided, it was another sign of the market’s fear factor as the war unfolds. Over this week, prices are well up on the elevated geopolitical and inflation risks.

Bullion may now have $2,000 an ounce in sight and from there, it’s not far to the record set during the pandemic. A rotation out of risk assets has “a lot more room to go”, Goldman Sachs Group Inc. has warned. Next week, watch for inflows into bullion-backed exchange traded funds for hints gold can gain.

©2022 Bloomberg L.P.

Bloomberg.com

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