Quick Bites | Commodity prices an enigma

The short term outlook for commodities is uncertain. Will the US tip into recession in coming months? Is the China recovery story fading? Oil producers are forcing down supply, but will it work in raising prices?

Investors are anxiously watching Chinese recovery data – the biggest swing factor in commodity markets. We continue to favour metals that will benefit from the green energy transition like copper and lithium. For copper we expect global demand intensity to continue to grow steadily, supported by the electrification megatrend, and a lack of major new discoveries, and the same with lithium, which has fallen sharply after an earlier spike. While there is a wide range of lithium forecasts in the market, consensus aligns with our view of moderating but healthy prices, especially in lithium chemicals.

On the oil front, global capital expenditure remains at a multi-decade low, and it is a matter of time before this supply shortage starts to kick in. But in the interim, the chart below shows that supplier tactics have failed to arrest the price slide. OPEC+ and Saudi officials have made three attempts to push up oil prices since the end of March, and yet prices are down since then and closing in on 52-week lows.

Source: Bespoke Invest