The Commodities to Watch in 2019

By Jeremy Hill, Ranjeetha Pakiam, and Jake Lloyd-Smith

Commodities took a kicking in 2018 — with deep losses in everything from oil and copper to coffee and sugar — so what’s in store for the 12 months to come? The inaugural What to Watch of the year offers a selective run through of prospects and pitfalls for some of the top raw materials, and it’s a reasonably positive picture that emerges.

That road map comes ahead of a busy period. The U.S.-China trade fight will be in focus this week, with a U.S. delegation in Beijing for talks from Monday. In addition, there’ll be more pointers on the macroeconomic outlook, with the World Bank updating its Global Economic Prospects report on Tuesday and a speech from Federal Reserve Chairman Jerome Powell on Thursday. Investors will also be tracking the U.S. government shutdown as disruption drags on.

As a final shout-out, two emerging-market hot spots need highlighting. The Democratic Republic of Congo just delayed the release of provisional results from the presidential election as criticism of the vote mounts in the metals powerhouse. And Venezuela’s Nicolas Maduro is due to be sworn in for a second term as president on Thursday, drawing fire from critics at home and abroad, and raising fresh questions about the nation’s ability to keep pumping oil.

Oil’s Well

The standout feature in commodity markets last quarter was crude’s swoon from four-year high into a bear market. The drivers of the reversal were record U.S. shale output, a clutch of sanctions waivers on Iranian flows, and a supply cut from OPEC+ deemed by some as too little. Concern about a deteriorating global economic outlook gave bears further ammunition. After that drama, prices may recover, with supply risks underappreciated.

In 2019, watch for more losses in crisis-hit Venezuela as supply risks tumbling below 1 million barrels a day. On top of that, U.S. waivers on Iranian cargoes are temporary, and not all may be renewed in May. And don’t underestimate the Saudi resolve to make the cuts stick. OPEC’s next meeting is in April, and prices may have regained some ground by then. The median Brent forecast tracked by Bloomberg is $68 a barrel, compared with about $58 at present…Read More