A 'better year' forecast for commodities

Business | 13 Jan 2020 11:15 am

Expectations of global growth, particularly in emerging markets mean this year is likely to be positive for commodities but with a number of wild cards, according to Citigroup Inc, Bloomberg reports.

The US and China, which hold outsized sway over the world’s economic fortunes, both may have policies that skew toward higher global growth, strategists led by global head of commodities research Edward Morse wrote in a year-ahead outlook report.

That would lead to greater demand for commodities, and in turn could attract investor inflows, which would support higher prices along with fundamentals. “2020 is shaping up to be a better year for commodities than previously feared,” Morse wrote. “Many commodities should see demand squeezing the limits of supply and pushing prices higher.”

While the underlying geopolitics, especially in the Middle East, could bring dramatic ups and downs in commodity pricing, a trade policy breakthrough between the world’s top two economies has the potential to add more than 500,000 barrels a day of global demand for oil as well as increase consumption of metals and agriculture, the strategists said.

Brent crude surged to near US$72 a barrel on Wednesday after Iran fired missiles at Iraqi bases housing U.S. forces in retaliation to an American airstrike that killed a top Iranian general. Prices retreated as the potential for war receded and are trading at about US$65 after capping a 5.3 percent decline last week.

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