Head of Commodity Strategy
The commodities sector traded softer during the first week of December—a month that traditionally sees activity slow to a halt ahead of the holiday season and year-end. During this period, traders and investors typically focus on defending hard-earned gains while minimising losses, potentially leaving markets directionless as they prepare for 2025—a year expected to bring both significant risks and opportunities.
The Bloomberg Commodity Total Return Index, which tracks a basket of 24 major futures markets spanning energy, metals, and agricultural commodities, slipped by 0.7% during the week, reducing its year-to-date return to 3.6%. Gains across the industrial metal, grains and soft sectors being offset by a near 4% setback in energy, courtesy of a near 10% slump in natural gas and distillate (diesel) weakness. On an individual level the top performing commodities were cocoa, wheat, copper and silver, while the weakness as mentioned was being led by natural gas, diesel, platinum and gold.
Nonetheless, some upside risks remain. These include the Trump administration potentially adding fresh sanctions on Iran and Venezuela, as well as geopolitical risks stemming from the Russia–Ukraine war and the Middle East conflict. A proposal by Treasury Secretary nominee Scott Bessent to increase US production by 3 million barrels of oil equivalent through 2028 will likely centre on increased natural gas and natural gas liquids production. With WTI trading below USD 70, however, incentives for further production increases remain constrained.
Brent and WTI crude oil futures have traded sideways over the past two years as OPEC successfully managed to reduce volatility while supporting prices during a period of softening demand in China. Brent support, as indicated in the chart, is found near USD 70 per barrel, followed by USD 65 per barrel, while the downtrend from 2022 currently provides resistance near USD 80 per barrel.
Despite the mentioned challenges next year, the global shift toward electrification continues, particularly in China, where the EV and hybrid boom increasingly signals a sooner-than-expected slowdown in demand for traditional fuels. In the US, the surge in power demand from data centres and AI technologies is reshaping the energy landscape. After two decades of flat electricity demand, the US Energy Information Administration (EIA) projects consistent annual increases through 2050, driven largely by these energy-intensive industries. This growth is expected to boost not only natural gas demand but also the need for industrial metals like copper, which is critical for conducting increased electrical loads.
High-grade copper, in an uptrend since the 2020 low, approached support last month near USD 4.00 per pound before rebounding on renewed demand from China and the energy transition. For now, and until China provides further support, the price is likely to remain capped below USD 4.35 per pound.
Following a relative deep October to November correction, silver buyers returned after support was re-established at USD 29.65, the 0.618 correction of the September to November rally and now a twice rejected level. For now resistance at USD 31.65 has yet to be challenged and broken in order to achieve an even greater comeback.
A recent decline in wheat futures in Chicago and Paris, driven by the prospect of ample supplies, was arrested as the dollar softened and poor winter wheat crop conditions in Russia, combined with excessive rains in Australia—two major suppliers of the grain—lifted hopes for US and European export demand. The agricultural sector has experienced a very mixed year, with strong gains in cocoa, coffee, and orange juice due to the concentration of production in regions negatively impacted by adverse weather, partly offset by losses across key crops amid ample supply following another bumper production year globally.
Recent commodity articles:
3 Dec 2024: COT: Mixed week in commodities as dollar buying continued
29 Nov 2024: Commodities take a breather after action-packed November
28 Nov 2024: Coffee surges to a 47-year high
28 Nov 2024: Choppy gold market turns to Santa for December support
27 Nov 2024: Podcast: Will gold enjoy a Santa rally for the eight year in a row?
25 Nov 2024: COT Report: USD long jumps; Mixed week in commodities
22 Nov 2024: Commodity weekly: Strongest performance since April
19 Nov 2024: Gold and silver rise on Russia-US tensions
18 Nov 2024: COT: Limited dollar demand despite strength; Acclerated metals selling
11 Nov 2024: COT: Speculators bought energy and grains, sold gold ahead of elections
8 Nov 2024: Commodity weekly: Mixed response to Trump 2.0
6 Nov 2024: Podcast: US election and the market reactions, including commodities
6 Nov 2024: Trump and Republican victories spark commodity decline
4 Nov 2024: COT: Speculators flock to dollars, exit commodities ahead of US election
1 Nov 2024: Commodity weekly: Some weakness seen ahead of critical week
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
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