Commodities volatile on $100 US oil talk

Talk that Saudi Arabia has its sights on $80 to $100 US a barrel oil again and of more U.S. sanctions on Russia triggered wild swings in trading of commodities on Thursday.
Oil prices continued rising on Thursday amid reports Saudi Arabia wants higher prices, and figures that show U.S. inventories fell last week. (Larry MacDougal/Canadian Press)

Talk that Saudi Arabia has its sights on $80 to $100 US a barrel oil again and of more U.S. sanctions on Russia triggered wild swings in trading of commodities on Thursday, though the potential boost to inflation hit fixed-income assets.

After Brent crude futures climbed past $74 US a barrel overnight, the Thomson Reuters CoreCommodity total return index opened on Thursday near its highest level since mid-2015, before giving back all its gains.

The surge came on a Reuters report that OPEC's new price hawk Saudi Arabia would be happy for crude to rise to $80 or even $100, a sign Riyadh will seek no changes to a supply-cutting deal even though the agreement's original target is now within sight.

After jumping nearly three per cent overnight, Brent was at $73.58 per barrel, up 0.14 per cent on the day. U.S. crude slipped 14 cents to settle at $68.33 US after being in positive territory earlier in the day.

The leap in the price of oil, combined with fears that sanctions on Russia could hit supplies of other commodities, energized the entire sector.

"It has been a very erratic day, it's a bit crazy," said Rabobank metals sector economist Casper Burgering. "Nickel went up by almost 10 per cent and aluminum by almost eight per cent and now are coming right back down." Expect more volatility, he said.

However such increases, if sustained, could fuel inflationary pressures. Investors hedged by selling sovereign bonds.

Nickel initially jumped by the most in 6.5 years on talk Nornickel - the world's second-biggest producer of the metal - could be impacted.

But nickel then turned negative, dropping as much as two per cent in price before regaining some ground.

Aluminum prices reached their highest since 2011, its raw material alumina touching an all-time peak before retreating when Russia floated the idea of a temporary nationalisation of sanctions-hit giant Rusal.