To read the full report, please download the PDF above.

Client feedback from our Commodities 2025 outlook

EHSAN KHOMAN
Head of Commodities, ESG and
Emerging Markets Research –
EMEA
DIFC Branch – Dubai
T:+971 (4)387 5033
E: ehsan.khoman@ae.mufg.jp

 

SOOJIN KIM
Research Analyst
DIFC Branch – Dubai
T:+971 (4)387 5031
E: soojin.kim@ae.mufg.jp

 

MUFG Bank, Ltd.
A member of MUFG, a global financial group

Global commodities

Having marketed our Commodities 2025 outlook (see here) to global clients, the first Commodities Weekly of 2025 addresses commonalities in questions and the feedback we have received to date. To recap, we hold conviction that the sweeping pivots in US trade, energy and fiscal policy in a governing trifecta Trump 2.0 mandate from a timing, magnitude and sequencing perspective strengthens the diversification play commodities offer portfolio allocations in 2025. We recommend a selective commodities bias in 2025 given differentiation in fundamentals alongside the unusually wide distribution of Trump-induced policy shifts – energy (neutral-to-bearish), base metals (neutral-to-bullish), precious metals (bullish) and agriculture (neutral).

Energy

Global oil markets are off to a strong start in 2025. A core driver has been a stronger physical market in the Middle East with the Brent-Dubai spread trading into negative territory in recent sessions, signalling that Asian buyers are positioning for other Middle Eastern crude grades amid risks of stricter US sanctions enforcement on Iran (and Russia). Looking past traders that are pushing oil prices higher, we believe the complex will struggle in 2025 (see here). Supply is abundant (both within OPEC+ and beyond), demand from top importer China looks tepid and Trump 2.0 is resolutely set on prioritising low-cost US energy. Meanwhile, in natural gas markets, the (anticipated) halt in Russian gas flows through Ukraine, has resulted in only a modest tightening in European gas inventories thus far, particularly when compared to considerably colder-than-average winter weather.

Base metals

Copper is a critical base metals that has been trading sideways of late. As the most macro-levered base metal, copper will continue to face near-term headwinds as a risk premium for China-focused tariffs continues to get priced in over early 2025. Yet, a reactive boost in Chinese stimulus is expected to underpin resilient global demand, which begins to stress constrained supply growth later in 2025 and 2026. This once again will refocus attention on copper’s medium-term supply gap, pushing prices back up towards USD10,000/MT by end-2025.

Precious metals

Gold bulls are taking delivery in a vote of confidence as the People’s Bank of China (PBoC) stated that it added 300,000 ounces to its bullion holdings in December 2024. Gold’s unshakable bull market and into 2025 it remains our most constructive conviction for the second consecutive year, reinforced by a combination of “fear” (geopolitical hedge of first resort) and “wealth” (EM central bank demand) dimensions.

Bulk commodities

Iron ore’s start to 2025 has been bleak, with robust supply from leading miners plus a Chinese steel industry that’s under pressure remaining top of mind of investors. The next catalyst are the release of December iron ore shipments data from Brazil and Australia – these readings from the two leading exporter may highlight a seaborne market that’s well-supplied.

Agriculture

India is considering revoking a three year ban on futures trading in seven agricultural commodities, that includes wheat and unprocessed rice, after studies found the steps were counterproductive, according to reports.

Core indicators

Price performance and forecasts, flows, market positioning, timespreads, futures, inventories, storage and products performance are covered in the report.