Interview, Other
Commodities Outlook: What’s Driving Oil, Gold, and Base Metals
- Global oil supply growth is projected to outpace demand by a factor of four this year, driven by non-OPEC producers like Brazil, Guyana, Norway, and Kazakhstan adding one million barrels per day between August and the previous month, while U.S. shale supply faces modest declines in 2025 and 2026 due to lower prices; conversely, Saudi Arabia and the EU are expected to regain market share, leading to a base case forecast of an additional $10 per barrel price drop over the next 12 months, with potential downside if OPEC increases production further.
- Oil price volatility is anticipated from geopolitical risks, including a potential spike above $90 per barrel if Iran's supply drops sharply and a surge past $110 per barrel in an extreme sustained disruption scenario at the Strait of Hormuz, though China's strategy to boost domestic energy supply and reduce foreign imports is expected to remain a bearish factor for oil and gas.
- Seasonal factors are expected to create specific demand and supply pressures, with strong July and August oil demand driven by cooling and travel, hot weather potentially boosting energy and power prices (especially in U.S. summer peak markets) due to higher AC usage, and the risk of supply disruptions to refined products when refineries struggle in extreme heat, while copper and other green metals remain bullish due to China's domestic supply push.
- Gold prices are forecast to rise approximately 20% to reach $4,000 per troy ounce, supported by a fivefold increase in central bank buying since 2022, no indications of reduced holdings over the next 12 months, a structurally weaker dollar, lower interest rates, and potential private investor reallocation from dollar holdings, positioning gold as a primary hedge against U.S. fiscal sustainability concerns, tariff escalation, or risk-off environments.
- Industrial metals are projected to benefit from diverse demand drivers, including a 25% year-to-date surge in China's solar installations and electrification supporting copper demand, which is also expected to rise significantly due to a discrepancy between current market pricing (15% tariff) and a base case of 25% with risks skewed toward 50%, alongside defense spending increases that could drive 13% of nickel demand.
- Macroeconomic conditions suggest modest global oil demand growth of 600 KBD (0.6%) this year as China's oil demand peaks and stagnates due to the shift to electric vehicles, while power demand is expected to outpace GDP growth due to data centers, and the gap between GDP growth and global oil demand growth is projected to settle at 2.5 percentage points, with tariff impacts on GDP expected to remain small and manageable in the near term despite front-loading effects.