The price of natural gas is, again, over 200 euros per

The price of natural gas is, again, over 200 euros per


Commodities dependent on supplies from Russia and the Black Sea rose sharply in the past 24 hours after Putin announced plans to escalate his war in Ukraine. European natural gas prices are once again trading above €200 per MWh, with the cost of diesel also rising, writes Ole Hansen, Head of Commodity Strategy at Saxo Bank in his new analysis.

Equally worrisome is a fresh rise in wheat prices on the Chicago and Paris exchanges, with traders worried about the UN-backed export corridor from Ukraine, a possible danger of reducing supply to a global market already concerned about the availability of protein-rich wheat .

Currently, an increasingly desperate and, with it, increasingly dangerous, Russian president has ordered the mobilization of reserve troops to “protect” Russia’s territorial integrity. A territory Putin would like to see includes the self-proclaimed republics of Luhansk and Donetsk and the Moscow-controlled regions of Zaporizhzhia and Kherson, where people will vote in the coming days on whether to become part of Russia.

Thus, the News and the threat of an escalation of the war send the Moscow MICEX index down more than 10% and weakened the euro, the latter already under nervous pressure before yesterday’s interest rate hike by the US Federal Reserve. Commodities dependent on supplies from Russia and the Black Sea region responded with higher trading costs, with a particular focus on gas, diesel and not least wheat.

Putin’s announcement sent wheat futures soaring

In addition, wheat futures in Chicago and Paris rose sharply after news from Russia was followed by Putin’s announcement. The referendum and annexation of Russian-controlled areas would likely further increase tensions with Europe and the US, while casting more doubt on grain supplies from the Black Sea area, particularly the UN-sponsored export corridor in Ukraine, which recently helped ease concerns over wheat and sunflower oil supplies.

Specifically, Ukraine’s wheat export reached 883,000 tons in August, but remains well below the 3.65 million tons that were shipped last year, and the long-term average of around 3.1 million tons. September is normally the busiest month for Ukraine’s exports, with an average of 3.3 million tonnes shipped in recent years. However, with plenty of grain still sitting in silos, an escalation in tensions could affect the ability to deliver wheat to a supply-stressed global market ahead of the Northern Hemisphere winter.

Mill wheat on the Paris Stock Exchange for December delivery is trading above support at €340 a tonne, with the next level of interest rising around €353 a tonne.

Gas is traded at over 200 euros per MWh

Meanwhile, European benchmark gas TTF is also trading above €200 per MWh again, after hitting a low of €170/MWh on Tuesday, as the market fears Russia could cut gas flows further on the two pipes still open. In particular Ukraine’s transit through Sudzha, which currently turns out to be about half of the 80 mcm/d currently sent to Europe, down 290 mcm/d from the same period last year.