The drop in oil prices in the fourth quarter and early this year spurred a rise in demand, and supply issues support the near-term outlook, said Jeffrey Currie, global head of commodities research at Goldman Sachs Group Inc. He said the bank is neutral on commodities.
“We are only bullish on oil for the next two-three months, after which we become bearish” on the outlook for increased supplies from the Permian Basin and elsewhere, he said.
Natural gas prices are collapsing across the globe as supplies from the U.S. to Australia flood the market, sparking concern some exporters will have to curtail output and raising questions about new investments. While prices typically ease at this time of year as mild weather in the northern hemisphere crimps demand, a boom in output of the heating and power-plant fuel is exacerbating the slump.
Metals
Falling stockpiles and the outlook for production deficits in some metals including copper helped bolster prices in the first quarter, with an index of metals traded in London posting its first quarterly gain since the end of 2017.
The rally in metals at the start of the year has hit a roadblock. While supply concerns are expected to persist, that may not be enough to fuel further price gains should demand ebb, even after the Chinese government announced economic stimulus measures.
For iron ore, troubles continue at top supplier Vale SA following a Jan. 25 fatal dam breach in Brazil that prompted shutdowns at several mines.
“So far the price increases have been driven by expectations” for iron ore supply shortfalls, Vale Chief Financial Officer Luciano Siani Pires said on the company’s earnings call Thursday. “Now the physical consequences will start to reach the market.”
One metal that may benefit from economic angst is gold, where futures posted their second straight quarterly gain on haven demand and the outlook for low interest rates.
Agriculture