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Commodities Climb to Six-Month High as Oil, Corn Rise on Ukraine

March 3, 2014
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Commodities advanced to the highest in almost six months as escalating tension in Ukraine fueled concern that energy and agricultural supplies will be disrupted while increasing demand for gold as a haven.

The Standard & Poor’s GSCI Spot Index of 24 raw materials climbed as much as 2.1 percent to 663.48, the highest since Sept. 9, and was at 658.87 as of 2:05 p.m. in New York. Crude oil jumped as much as 2.6 percent, wheat surged 7 percent, while gold increased 2.5 percent. Corn and gasoline also rose.

"The uncertainty of how the Ukrainian issue will play out will continue to lift commodities across the board," Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $150 billion of assets, said in a telephone interview. "Ukraine being a major supplier of grain has cast some doubt in the global markets." Demand for haven assets such as gold "will continue until there’s a more diplomatic approach taken," he said.

Russia, the world’s largest energy exporter, seized control of the Black Sea region of Crimea in Ukraine, where tension has escalated since Russia-backed Viktor Yanukovych was overthrown as president on Feb. 22. More than half of Russia’s gas exports to the European Union are shipped through Ukraine, which was forecast to be the third-biggest corn exporter this year, after the U.S. and Brazil, and sixth-largest in wheat.

The GSCI measure of commodities has rallied 4.1 percent since the end of December, rebounding from a 2.2 percent drop last year.

 

Gas Prices

 

Earlier, natural-gas futures jumped as much as 2.8 percent in New York as Ukraine mobilized army reserves and amid speculation that a winter storm moving from the U.S. Midwest to the Northeast will boost heating demand. Prices erased the gain, and fell as much as 2.3 percent. U.K. natural gas, which is not part of the commodities index, jumped the most since September 2011.

Russia, which provided 30 percent of Europe’s natural gas last year, sends half of its supplies via Ukraine. So far, Russian gas shipments to Ukraine and the rest of Europe haven’t been disrupted during the crisis.

About 313,000 barrels of crude a day transited via Ukraine in 2013, according to the country’s Energy Ministry. The southern branch of the Druzhba pipeline, which transports about 1.2 million barrels of Russian oil to Europe, passes through Ukraine on its way to refineries in Hungary, Slovakia and the Czech Republic.

 

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RELATED TOPICS: Corn, Marketing, Energy, Global Markets

 
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