In 2022, global commodities markets were pushed and pulled by conflicting forces. War in Europe constrained supplies and boosted prices of energy and agricultural commodities. At the same time, continuing COVID lockdowns in China and flagging global economic growth, high inflation and rising interest rates reduced demand for other commodities.
The year ahead may present additional disruptions, says Francisco Blanch, Head of Global Commodities and Derivatives Research for BofA Global Research. Here, he discusses the outlook for a range of commodities and how China’s reopening could affect the global economy.
This interview took place on: December 2, 2022
Commodities surged in 2022, led by energy and agriculture. What’s your market outlook for these areas in 2023?
Disruptions from Russia have severely affected the European market for coal, oil and natural gas. We expect energy supplies to be extremely tight in 2023, and prices for oil and natural gas should stay high—at about $100 a barrel for Brent crude. In Europe, natural gas could cost anywhere from €100 to €200 per megawatt hour. That’s likely to be five to eight times the cost of natural gas in the United States, where supplies benefit from huge North American production.
Much of the disruption in agriculture also originated from the Russian invasion of Ukraine. With fewer contributions from both countries, demand exceeded supply and prices rose. But the supply side for agriculture is highly fragmented, and when prices are high, it’s relatively easy for farmers to produce more. Farmers in Brazil and elsewhere are doing that now, which makes it likely prices will come down in 2023.