Our Outlook on the Commodities Market in 2024: Slightly Optimistic
With a lot of uncertainty regarding global growth, we are prudently optimistic for the commodities overall market in 2024.
For the commodities market in general, 2023 was meant to be a year of strength. In 2021 and 2022 commodities were the best-performing asset class, and coming into the year 2023, it was a potential contender to be the top performer again.
Nonetheless, this didn’t happen. Europe had a very mild 2022/23 winter, which didn’t put a lot of stress on the gas market. Overall trade was able to adjust to sanctions and bans related to Russia’s invasion of Ukraine, and the much-anticipated recovery of China wasn’t gone as expected. A week performance of the property sector, central bank tightening and a strong US dollar caused additional stress to commodity markets.
In our view we expect large parts of the commodity markets to grow in 2024. Most commodity markets forecasts range from neutral to slightly optimistic. In addition, the uncertain geopolitical environment will likely persist through 2024. The general expectation that the US Federal Reserve will reverse policy tightening and start to cut interest rates next year, along with a weaker USD will also dynamize commodity markets. At the same time, there are several demand risks given expectations for a slower global growth in 2024.
The OPEC policies will be crucial for the oil market in 2024. Several countries demonstrated their desire to support higher prices last year and we do anticipate this will not change through 2024. We anticipate most fuel prices to trade higher from current levels, by the end of the year. The tensions in the Middle East and the potential for stricter US sanctions against Iran could weigh in on the overall oil supply. This could leave the oil market much tighter than expected.
Global gas markets will start to see new LNG export capacity, largely driven by the US, starting up towards the end of 2024, leaving Europe less vulnerable from late 2024.
The outlook for metals largely depends on the developments in China. We anticipate there will not be a significant recovery in metals demand, due to the fact that the property sector in China is likely to remain weak through 2024. Valuable longer-term foundations for several metals and historically tight inventories suggest that there is still some upside for most metal commodities in 2024, despite the fact that most markets are more or less balanced.
Precious metals are likely to rise more next year, and we expect gold to reach new record highs in 2024. The overall expectation that the Fed will cut rates, and the projection of a weaker US dollar will increase demand.
Grain markets have come under pressure this year despite Ukrainian grain exports falling following the suspension of the Black Sea Grain Initiative. Strong supply growth from other key suppliers has minimized the impact of lower Ukrainian exports. Corn prices are likely to remain under pressure with increasing stocks, and we expect soybean prices to go lower based on a strong South American output.
El Nino and broader weather events caused significant concerns over supply of several Soft commodities which led to a rather volatile year 2023. Cacao traded to record levels and the overall expectation is a third harvest in a row with a deficit, and so we expect a very volatile cocoa through 2024.
The sugar market has also been a strong performer in 2023 and we expect El Nino to hit overall output in Asia and leave the global market in deficit in 2024. We see prices remaining high at least until the start of the next Centre-South Brazil harvest, which is expected to be a promising high-volume crop.
Overall, we start 2024 with a rather optimistic view on the commodities market.
