Commodity markets found themselves in a state of stagnation throughout 2023, punctuating the volatility instigated by Russia's invasion of Ukraine and the supply-chain disruptions from the COVID-19 pandemic in 2022. The soaring of raw material prices in the past was juxtaposed with a subdued economic outlook in 2023, leading to a lackluster performance for commodity indices. However, as the year drew to a close, there were glimmers of heightened activity, particularly within the crude oil market. Nonetheless, concerns over demand continued to linger.
Market Predictions for 2024
As we turn our gaze towards 2024, it is anticipated that supply issues, together with a resurgence in demand, may stir significant growth in the markets for crude oil, grain, and certain metals. Crude oil prices, which ascended to a high of $90 per barrel in September 2023, are forecasted by many analysts to recede to $80 or lower throughout 2024. This prediction is due to new supplies entering the market and a slow pace of economic growth. However, there is potential for prices to ascend if Saudi Arabia, the world's leading producer, opts to implement deeper production cuts. These cuts would extend beyond the 1 million barrels per day reduction made in July 2023, which represented 1% of global demand. A potential squeeze in Iran's output due to sanctions or shipping issues could also lead to a market squeeze when economic growth picks up.
Global Economic Outlook
The U.S. economy is predicted to enjoy a 2.6% growth in 2023, and S&P Global Ratings anticipates a 1.5% expansion of the U.S. economy in 2024. This weaker growth is expected to slacken the demand for labor further, causing a rise in the unemployment rate. On the other hand, the interest rate on 10-year Treasury yield is expected to decline gradually over the next two years to settle in the 3.0-3.5% range.
Commodities and Equities Performance
In other developments, hot and dry weather in Brazil is expected to reduce yields in the world's top soybean producer, affecting commodity prices. The most-active soybean contract on the Chicago Board of Trade (CBOT) was unchanged at $13.46-1/2 a bushel. In the equities market, The utilities and energy sectors showed the strongest performance, while health care lagged behind. Finally, the World Semiconductor Trade Statistics (WSTS) forecasts a contraction in the global semiconductor market of 9.4 percent in 2023, followed by a robust recovery, with an estimated growth of 13.1 percent in 2024.
These developments signify that commodity markets, particularly those for crude oil, grains, and certain metals, may become more dynamic in the upcoming year. With the intersection of various global events and economic factors, the performance of these markets in 2024 are of keen interest to economists, investors, and policy-makers alike.