Commodity Prices on the Rise: A Glimpse into the OPEC Forecast and Agricultural Risks

Oil prices saw an uptick on Thursday, propelled by OPEC’s optimistic projection of strong oil demand growth in 2025. This surge in prices comes amidst ongoing vigilance from market players due to geopolitical uncertainties. According to OPEC’s monthly report, global oil demand is anticipated to increase by 1.85M bbl/day in 2025, reaching 106.2M bbl/day, following a growth of 2.25M bbl/day for 2024.

Discussing the prevailing market conditions, Yeap Jun Rong, market strategist at IG, indicated, “Brent crude prices remain broadly stuck in a range as they have been over the past two weeks, as market participants struggle to weigh mixed demand-supply dynamics with prevailing geopolitical tensions.”

Simultaneously, severe winter weather conditions have disrupted oil production in the Bakken and the Permian. JPM Commodities have warned of potential minor outages in the Eagle Ford and the Gulf Coast. JPM also noted, “Production outages in North Dakota are estimated to have peaked at around 700 kbd—more than half of what the basin produced last month and significantly larger than the initial estimates of 280 kbd disruption going into last weekend.” Furthermore, the brokerage has adjusted US crude and condensate production forecast down by 365 kbd for January and cut natural gas supply by 3.6 Bcf/day.

In the realm of precious metals, prices have made modest gains against a softer dollar index (DXY), while there has been a reduction in the extreme dovishness priced into the 2024 interest rate outlook by traders.

ANZ’s note highlighted the potential for gold to benefit from easing monetary policy, heightened geopolitical risks, and robust central bank buying, while acknowledging that the low investor allocation to the sector could yield a powerful tailwind if there is a rebound in investment demand. ANZ also alluded to supply-side challenges within the metals sector, detailing the impact of closures across copper, zinc, and critical mineral markets, which are delaying new projects and could have significant implications for the energy transition in the medium term amidst an uncertain economic backdrop.

Additionally, ING reported a 3.7% year-on-year increase in primary aluminium output in China to a record of 41.59 million tonnes in 2023. However, December’s production was 3.59 million tonnes, up 4.9% year-on-year but down on a daily basis due to smelters in Yunnan reducing output in response to the province’s limited power supply during the dry season.

Shifting to the agriculture market, soybean futures have experienced gains, while wheat and cocoa prices have seen a decline. Notably, the recent cold spell in the US poses a potential risk to the 2024 winter wheat crop, as highlighted by JPM.