Commodity Markets Remain Calm Amidst Global Turmoil: What Will It Take to Rock the Boat?

Commodity Markets Remain Calm Amidst Global Turmoil: What Will It Take to Rock the Boat?

Despite ongoing global conflicts and disruptions, commodity markets have remained surprisingly stable. However, experts are questioning how long this calm can last.

In a world filled with geopolitical tensions, conflicts, and environmental challenges, one would expect commodity markets to be in a state of constant turmoil. Yet, despite recent events such as Russia’s aggression in Ukraine, drone attacks in the Red Sea, protests in Libya, and a severe drought in the Amazon, commodity markets have remained remarkably calm. The Bloomberg Commodity index, which tracks raw-material prices, fell by over 10% in 2023, and oil prices have also declined. This raises the question: what will it take to truly rock commodity markets?

Supply Response and Adaptation:

One reason for the current stability in commodity markets is the supply response to elevated prices. After experiencing successive shocks in the early 2020s, markets have adapted to better manage price fluctuations. Demand has been relatively restrained due to suppressed consumption, but it is the increase in output and reshuffling of trade flows that has made the world more shockproof today. Investors are more relaxed because supply levels for many commodities are better than they have been in years.

Oil Market Dynamics:

The oil market serves as a prime example of the supply response in action. Increased production from countries outside of OPEC+ has been sufficient to cover the rise in global demand. As a result, the alliance was forced to cut its output by 2.2 million barrels per day (b/d) in a bid to stabilize prices. However, the market only narrowly avoided a surplus in the final quarter. Kpler, a data firm, predicts an average oversupply of 550,000 b/d in the first four months of 2024, which would help replenish stocks. New barrels from Brazil, Guyana, and the United States, where efficiency gains are compensating for a decrease in rig count, will contribute to this oversupply.

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Gas Market Resilience:

In Europe, gas-storage levels remain high due to manic buying and a mild winter. Gas-storage levels are currently around 90% of capacity, well above the five-year average. Assuming normal weather and no major disruptions, storage levels are expected to remain close to 70% full by the end of March. Ample stocks will keep gas prices down in Europe and Asia, incentivizing more coal-to-gas switching in power generation. This, in turn, will further lower coal prices. Additionally, an increase in production in China and India has dampened green-metal prices, ensuring a steady supply of lithium, nickel, and cobalt.

Grains and Agriculture:

The supply of grains and soybeans is also booming, with increased planting and favorable weather conditions leading to record output projections. This abundance of supply will push the average stocks-to-use ratio at food exporters from 13% to 16%, a level not seen since 2018-19. However, low grain prices may threaten farmers’ margins and impact future planting.


Despite the current calm in commodity markets, experts warn that it may not last. While global growth is expected to be slow, a surprise economic rebound or unexpected weather events could disrupt the stability. Additionally, the potential for military conflicts, particularly in the Middle East, could have a significant impact on commodity prices. The world’s commodity markets have proven their resilience in the face of adversity, but it remains to be seen how long this calm can endure. As we navigate an uncertain future, the potential for extreme events continues to loom, reminding us that complacency is not an option in the world of commodities.

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