Commodities Report: February 5 — February 9, 2024
Beyond supply and demand, the commodity markets are hugely driven by geopolitical tension, the US primary election, the net zero emission goal of 2050, negative real GDP growth, and inflationary pressures, led by rising food prices.
However, geopolitical tension accounts for 50%+ of market drivers. In addition to the Russian-Ukraine conflict, there is the Israel-Hamas war, which has continued to affect global trade through supply chain disruption.
Voice of America (VOA) reports that an estimated 4 billion people across 50 countries are expected to vote in national elections.
Countries are beginning to increase energy transition investment efforts towards 100% carbon-free emissions or renewables, which has disrupted the supply chain. However, there is a shortage of metals critical for the energy transition (not enough to meet the 2050 goal). More than 100 countries made promises in the recently concluded COP28 to triple renewable energy capacity by 2030. Hence, without actual structure on how to achieve these plans.
In addition to expected rate cuts, which may heighten inflationary pressures (more money) and dampen growth in real terms (recession).
Table 1. Inflation rates across selected countries
Agriculture: These events are expected to create more volatility in the commodities market further into 2024. For instance, Cocoa prices have soared to their highest levels in 46 years, coffee has risen to highest-highs in 16 years, and sugar prices have risen to their highest-highs in 10 years.
Metals: Markedly, uranium has seen a whopping 300%+ rise from the 2020 low, representing a 16-year high.
Energy: WTI and Brent crude have risen by $10 per barrel to their highest price in 2024. WTI is currently at $72.44 bpd while Brent crude is $76.64bpd per barrel.
Figure 1. Crude Oil Trend
Takeaway:
- The energy transition efforts are the cause of the next level of demand for renewable materials, such as silver, aluminium, platinum, palladium, copper, lithium, cobalt, nickel, and rare earth elements.
- The supply chain disruption caused by geopolitical risk and climate change has made Agriculture one of the most viable commodity asset classes of 2024
- The rally is expected to go further in the face of rising disruptions.
- These bullish trends are expected to create gaps for supernormal profits and exponential capital gains.
Social Phenomena;
· Google searches on ‘how to trade commodities’ have reached 59.3 million results and counting.
Definition of Terms
· Bpd — Barrels of Crude Oil per Day
· COP28 — The United Nations (UN) Climate Change Conference held in Dubai, United Arab Emirates, from November 30 to December 12, 2023.
· GDP — Gross Domestic Product
· WTI — West Texas Instrument
Redfox Analytica and Global Markets. https://www.linkedin.com/in/redfoxanalytics/
