In the past year, global commodity futures exhibited starkly divergent trends, with international gold prices reaching new heights, oil initially declining before rebounding, and natural gas emerging as a surprise contenderThe landscape for industrial metals presented a mixed bag, while soft commodities such as cocoa and coffee distinguished themselves from the agricultural sector amid shifting market dynamics.

As we usher in a new year, various institutions have revised their forecasts for commodity futuresGiven the uncertainties surrounding the global economic outlook and expectations of a strong dollar, it is anticipated that the overall trajectory for commodities will face pressure leading into 2025. However, there remains a sustained optimism for gold and natural gas, with oil and copper's fortunes hinging on the prospects for global economic recoveryCocoa and coffee may find themselves at a delicate turning point in terms of pricing and demand.

One sector that could witness persistent sluggishness is oil

Throughout the last year, oil prices were weighed down by weak demand from major consuming nations and an oversupply in the marketThis necessitated OPEC+ to repeatedly delay its planned production recovery strategiesObservers predict that the pressure on oil prices will continue through 2025.

According to a report from ING, the annual market outlook indicated significant pressure on oil prices this yearThere are concerns about demand and the risk of oversupply in 2025. The expected surplus has shrunk from over a million barrels per day to approximately 500,000 barrels, even after OPEC+ members opted to prolong voluntary production cuts.

Meanwhile, the Commonwealth Bank of Australia forecasts that Brent crude prices may drop to $70 per barrel due to an anticipated increase in non-OPEC+ oil supply, which is expected to overshadow any growth in global oil consumption.

Bank of America, in its latest prediction, estimates that the average price for Brent crude will settle at around $65 per barrel in 2025. This reflects a substantial increase in oil production outside of OPEC+, posing a considerable challenge for the cartel as many oil-producing nations are already grappling with deteriorating fiscal states due to declining oil revenues.

In stark contrast, natural gas has emerged favorably

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European natural gas prices surged by over 30% last year following the halt of Russian gas shipments to Europe on January 1. This disruption contributed to heightened uncertainty in the global natural gas marketThe onset of a new cold wave accentuated seasonal supply-demand worries, further driving up gas prices.

Before the conflict erupted in 2022, Russia had met around 40% of the EU's natural gas needsIn 2023, however, that figure plummeted to just 8% of the peaks seen in 2018-2019. With supplies from the Far East diminishing, both European and global gas prices skyrocketedThe EU subsequently sought alternative energy sources, turning towards Liquefied Natural Gas (LNG) imports from the United States, Qatar, and Australia, all while striving to develop new energy technologiesEnergy costs, however, remain significantly inflated.

American LNG appears well-positioned to fill the void created by the loss of Russian supply

Currently, the U.Sexports natural gas to Europe from eight facilities, thereby increasing its role as a crucial fuel provider and potentially becoming the leading supplier of natural gas globallyHowever, this surge in exports may impact domestic consumptionRecently, U.Snatural gas futures witnessed another spike of over 10%.

Citi analysts have pointed out that remaining winter cold weather in the U.Sand Asia could continue to keep natural gas prices elevated.

Fitch's BMI research forecasts that the price of U.Snatural gas will rise approximately 40% by 2025, reaching about $3.40 per million British thermal units (MMBtu), buoyed by increasing LNG demand and greater net pipeline exportsThey suggest that LNG will continue to catalyze new consumption amidst a backdrop of rising export capabilities and strong demand from Europe and Asia.

Gold is another commodity that might see ambitious price increases, with analysts speculating it could challenge the $3,000 mark

Last year, gold experienced its best annual performance since 2010, with data from FactSet indicating an increase of roughly 26% in 2024 driven by purchases from central banks and retail investorsGold prices celebrated the milestone of reaching $2,800.

A report from the World Gold Council indicated a 5% year-on-year growth in total global gold demand in the third quarter of last year, which amounted to 1,313 tons, surpassing $100 billion for the first timeNotably, gold ETFs emerged as a significant force, with net inflows of 95 tons over three months—the first increase since early 2022. The World Gold Council opines that continued interest in ETFs is likely if the Federal Reserve persists in easing interest rates.

Investment services firm BullionVault and JPMorgan forecast gold prices could rise to $3,000 per ounce by 2025. Adrian Ash, research director at BullionVault, comments on the optimistic market outlook for gold and silver in light of geopolitical tensions and governmental debt concerns, emphasizing gold's role as a hedge against risks.

However, Goldman Sachs recently adjusted its projections for 2025, reducing its target price for gold from $3,000 to $2,910 per ounce due to anticipated interest rate cuts being possibly more subdued than previously expected

They suggest that it may take until mid-2026 for gold prices to reach the $3,000 benchmarkGoldman notes that the interaction between declining speculative demand and increasing central bank purchases will likely keep gold prices steady within a range over recent months, with central bank demand being a key long-term support for gold prices.

As for copper, facing demand concerns, its status as an economic barometer illustrates the metal's vital role in electric vehicle and grid manufacturingDespite a price increase of 8% last year, worries of oversupply weighed on copper futures in the latter half of the year after they peaked in MayFor the first time in four years, copper inventories on the world’s major exchanges exceeded 500,000 tons.

BMI commented that potential policy shifts could lead to a slowdown in the energy transition, which might dampen the ‘green sentiment’ supporting prices in 2024.

John Gross and Company, a metals consulting firm, warned that a combination of high inflation, high-interest rates, and a strong dollar is likely to exert pressure across all metal markets, including copper.

Carsten Fritsch, a commodities analyst at Commerzbank, expresses that industrial metals are grappling with prevailing negative investor sentiment, with the market awaiting clearer signals of recovery from the consumer side.

The performance of soft commodities like cocoa and coffee raises intriguing possibilities

Driven by climate factors, these products have dominated the market for a second consecutive year, with bad weather and supply constraints in major producing regions leading both to historic price surges.

Ole Hansen, an analyst at Saxo Bank, notes that cocoa and coffee production struggles to meet the ever-growing demand, given their limited growth regions concentrated in tropical zones, particularly Brazil and Vietnam, which contribute roughly 56% of global production.

In a report, ING highlights that the cocoa uptrend shows no signs of abating, with the 2023-2024 cocoa sales year likely concluding with the largest global supply deficit in nearly 60 years.

However, this price surge could jeopardize the market's consumption capacityLast year, Mark Schneider, CEO of Nestlé—the world’s largest coffee producer—was ousted due to disappointing sales amid rising prices, resulting in a loss of market share as consumers shifted to cheaper alternatives.

Rabobank suggests that, given these commodities' trading prices far exceed production costs, they foresee an expansion in output next year, albeit with a contraction in demand.