Commodity price gains become smaller
Optimism over a possible US-China trade deal have continued to be supportive for commodity prices such as oil and base metal prices. Over the past three months, a handful of commodity markets bucked the upward price trend.
Most of which are agriculturals, but also coking coal, aluminium and gas prices lost ground. The common denominator for price pressure in most of these commodity markets was abundant supply. We think that in the months ahead, commodity prices will be influenced by the trade deal narrative. Positive news from the talks will lift commodity prices further (such as industrial metals, oil and grains). However, until an actual agreement is reached, we think the pace of commodity price increases will likely be limited. This is because already a significant part of a positive outcome is priced in. We expect an upside for commodity prices in the long run, based on sound fundamental drivers. However, since we lowered our economic growth expectations, the upside potential will be lower.