2024 Commodities Outlook: A Measured Approach Amidst Uncertainty

In contrast to the robust performance of commodities in 2021 and 2022, 2023 did not follow the expected trajectory of strength. A mild European winter and an overestimated impact of geopolitical tensions, including Russia’s invasion of Ukraine and China’s economic instability, particularly in its property sector, led to a downturn in the commodities market. This was further exacerbated by central bank tightening and a stronger US dollar.

Looking ahead to 2024, the outlook is cautiously optimistic. Most commodity fundamentals are neutral to mildly bullish, supported by ongoing geopolitical tensions. The expected policy reversal by the US Federal Reserve and a weakening dollar could provide some support, although global economic softening poses demand risks.

Oil markets in 2024 will be heavily influenced by OPEC+ policies, particularly Saudi Arabia’s pricing strategies. A balance is anticipated in the first half of the year, However, Middle East tensions and US sanctions against Iran could tighten supply more than anticipated.

European natural gas is viewed neutrally, starting the 2023/24 heating season with full storage. The introduction of new LNG export capacities by the end of 2024, particularly from the US, may reduce Europe’s vulnerability.

The US natural gas market is expected to see a constructive price environment due to increased export demand and slowing domestic production growth.

Metal prices in 2024 will largely depend on China’s economic performance, particularly its weakening property sector. Base metal markets are projected to be balanced, with potential for deficits depending on demand fluctuations.

Food protectionism, a consequence of geopolitical instabilities, is likely to continue, influencing grain and soft commodity markets. Corn and soybean prices are expected to face a change , while wheat might see tighter global stocks. Cocoa and sugar markets are affected by El Nino.

In summary, the commodities market enters 2024 with cautious optimism, balancing fundamental strengths against geopolitical and economic uncertainties.

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Source: https://think.ing.com/reports/commodities-outlook-2024-cautious-optimism-report/