Why commodity prices have risen lately

June 3, 2022 (Investorideas.com Newswire) Many are noticing that the stock market is not performing well and that stock prices are decreasing. Commodity prices however are soaring, resulting in the immense growth in value for many commodities. Some of these are for example oil and metal, and this could be your hint to start investing in oil.

Russia-Ukraine conflict

We are living in a time where war has broken out in Europe, and this has caused market uncertainty and economic sanctions. Many countries are refusing to receive commodities from Russia after their invasion and declared war against Ukraine. Russia has been a large producer of commodities like oil, metal, and wheat to mention just a few, for many years. This has led to greater demand, and a lower supply, thus increasing the price of the materials left in circulation. 

The international impact of the situation in Ukraine is showing more every day, and western nations are avoiding Russia's natural resources. As a leading global supplier of oil, gas, metals, and grains this is set out to become a huge problem. The conflict is also showing visible impacs on the demand for Russian oil. The nation has 5m barrels of oil every day, but buyers are increasingly becoming more reluctant to commit.

Historic numbers

The rise in prices for raw materials has hit historical numbers, and it is set to post the biggest weekly rise since the 70s. The commodity prices are at the highest level since 2008 right now. Natural gas prices have now hit a new record, and we are on track to see the biggest weekly price increase in 50 years.

Indexes show that the global price of raw materials increased by 16 percent in early March. At the same time, the oil prices in the US are hitting a new high. They have not seen anything like it since the financial crisis in 2008. Many Americans are seeing the need to stop using their gas-driven vehicles due to the immense price increase.

The nation is also experiencing price increases in other industries, as the wheat futures in Chicago are now measured above $12 a bushel. Among the commodities that have soared lately is also aluminium and coal, which soon will show their extreme effects on the consumers and global businesses.

The fear of inflation

Most European countries have been depending on natural gas from Russia, and the prices have almost reached €200 per megawatt per hour. This massive economic change is set to push inflation and central banks across the globe will face issues controlling it. This will further lead to increased costs of living, which will impact most people around the world.

All loading ports in Ukraine have been shut down, while the Black Sea ports are still open. Vessel traffic is nearing stand still, and shipping companies MSC and Maersk are suspending all cargo to and from Russia. Furthermore, a short supply of fertiliser is part of the worries for this year's crop. The spring planting in Ukraine usually starts in April but will face huge consequences from the war this season.

It is fair to say that the world is experiencing extraordinary situations, and the uncertainty makes it both frightening and hard to plan for the future. Russia's invasion of Ukraine is absolutely starting to show its ripple effect, and many are scared of what the next months have in store for us. This increase in price is expected to continue and might rise to the height of the 70s.

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