#todayinsight: Commodity Conundrums: Navigating the Waves of Price Fluctuations and Market Stability!

Commodity prices have been on down trend since the middle of 2022. Of course there are some noticeable exceptions, namely cocoa beans which are currently at the highest prices in the last four decades. But the overall trend has been bearish. 

On the energy front, the Russian attack on Ukraine caused a deep shock in the beginning of 2022. The natural gas prices skyrocketed in the 2022 summer. But since then, the price has been moderating steadily. The current warm winter also helped Europe to keep its gas storage around 90 percent of its overall capacity.

In the oil market, the cartel of the oil producers  plus Russia, which is called Opec+ decided to cut the production in the middle of 2023 to balance the market and keep the prices high enough. But new barrels from the United States, Brazil and Guyana canceled out the production cut. According to Kepler, a data firm,  there is an average oversupply of 550 thousand barrels per day in the first four months of 2024.

In the soft commodity market, the production of grains and soybeans are adequate outside of the Russia-Ukraine conflict zone. That will push the stock to use ratio of food exporters from 13 percent to 16 percent. This ratio is a key determinant of food prices.

The metal market is also sufficiently supplied. It seems like in the beginning of 2024 the commodity markets are well stabilized. And the market is waiting for a new shock to start its overall uptrend. 

Source: Bloomberg