Are Commodity Prices Really Immune to Economic Weakness?

As This issue of Commodity Trends introduces our forecast for the differential between WTI (West Texas Intermediate) and WCS (Western Canadian Select) oil prices, and our aluminum, copper, nickel and iron price projections. They are presented in their respective sections (energy and base metals) and in Table 2 on page 7.

• Signs of fractures are beginning to show in the global economy and we anticipate that recessionary conditions will push commodity prices lower.
• Although oil prices are likely to remain volatile due in part to economic and geopolitical uncertainty, they probably won’t fall much.
• OPEC+ announced it’s cutting production by 1.66 MMb/d the rest of the year starting in May. While unexpected, the news isn’t surprising. The market could, therefore, remain in deficit for the rest of 2023.
• While metal prices may recover some of the recent lost ground in the very near term, the decline in demand for goods and the widespread economic slowdown are likely to lead to further price declines later in 2023.
• Financial market uncertainty may drive investors towards safe-haven assets like gold. In addition, the anticipated deterioration in the economy—likely coupled with a decline in bond yields—should also boost the price of gold.