2025 Forecast: Top 5 Factors Driving the Commodity Market
The outlook for commodities in 2025 is based on five key factors, analysts at Bank of America Securities noted in their Commodities for the Year Ahead report.
These factors, each of which has a vital impact on market dynamics, range from macroeconomic conditions to supply and demand fundamentals across sectors.
Geopolitical Tensions and Trade Policies
Trade wars and geopolitical uncertainty will continue to cast a shadow over global commodity markets.
Analysts expect tariffs and other trade barriers, particularly those involving the United States and its trading partners, to dampen global manufacturing activity.
A strong US dollar, supported by higher interest rates, is exacerbating this trend, making commodities more expensive in emerging markets.
These dynamics are expected to weigh on demand, particularly in sectors such as industrial metals and agricultural products.
Supply Dynamics in Energy Markets
Oil markets are expected to remain oversupplied in 2025, with non-OPEC supply growth outpacing demand.
Increased production from the US, Brazil and Canada, coupled with additional OPEC+ barrels, is likely to put downward pressure on oil prices, with Brent crude expected to average $65 per barrel.
Meanwhile, US natural gas could outperform oil, supported by lower capital spending and strong demand for LNG.
However, geopolitical risks, such as potential disruptions from Middle East tensions, remain a critical variable.
Energy transition and metals demand
The ongoing energy transition, with increased investment in electric vehicles and renewable energy infrastructure, is expected to support demand for critical metals such as copper, aluminium and silver.
However, prices are likely to experience short-term volatility as trade disputes and a weaker Chinese economy create headwinds.
Despite these challenges, tight supply conditions, particularly in the copper and aluminium markets, could support a price recovery in the latter half of the year.
Agricultural Market Pressures
Agricultural commodities face a mixed outlook, with grains such as wheat and corn remaining weak due to record crop production and weak global demand.
Conversely, sugar and natural gas prices have the potential to gain upward momentum. The impact of climate and weather patterns, along with the potential for renewed trade tensions, particularly between the US and China, are adding another layer of uncertainty to the agricultural sector.
Monetary Policy and Macroeconomic Trends
The path of US monetary policy, including expectations of further rate cuts, plays a pivotal role in shaping commodity markets.
While lower interest rates may support gold and silver by making them more attractive as safe-haven assets, a strong dollar continues to challenge commodities broadly.
Global GDP growth, forecast at 3.3% for 2025, provides a cautiously optimistic backdrop, although risks from inflation and economic slowdowns remain in key markets.