COMMODITIES: THE TEN KEY ASPECTS FOR 2019

  • After a good start in 2018, since May the market tended to fall driven, mainly, by international commercial tensions.
  • The development of international trade relations, particularly between the United States and China, will be essential for the agricultural and metals market.
  • Regarding the oil market, the current framework suggests that OPEC would have to take measures during the second half of 2019.

The discussion on active management versus passive management has intensified during the last year given the high demand that indexed products have generated among investors and the volume of investment they have captured. However, according to a study conducted by Agnieszka Gehringer and Kai Lehmann, senior analysts at the Flossbach von Storch Research Institute, the discussion now also reaches the bond market.

Uncertainty is common in the market and, for 2019, will be present among commodities. According to ING analysts, greater uncertainty will cause more volatility for this asset class. In fact, after a good start in 2018, since May the market tended to fall driven, mainly, by international commercial tensions.

“A key issue that has partially offset the bearish sentiment of trade tensions has been the sanctions in both the oil and metal markets. It is likely that these two issues will remain key for the commodity markets after 2019, as it is not yet known exactly how they will develop, “says ING in its analysis.

In the oil field, the market will closely follow the evolution of OPEC policy throughout the year. According to the financial institution’s analysis, “whether or not the group extends its last agreement beyond six months, will depend on US sanctions on Iran, expectations of growth in demand and growth in the production of U.S. The current framework suggests that OPEC would have to take action during the second half of 2019. However, its intervention in the market should mean that oil prices could rise from current levels throughout 2019. “

Another key market will be metals. In this sense, the analysis points out that conversations and commercial tensions throughout this year will be key for its evolution. “Fundamentals of base metals are generally constructive, which should support prices, but the potential for a slowdown in China will likely make the market cautious. The sanctions are now somewhat less worrisome, as the US administration announced plans to lift the sanctions against the aluminum producer, “they clarify from ING.

Finally, he points out that agricultural markets will depend, once again, on commercial relationships. “The talks between China and the United States at the G20 summit were constructive, which has led China to re-position itself as the buyer of US soybeans. However, as long as the 25% import duty on US soy remains in force, it is unlikely that China will return as a major buyer. This has an impact on other agricultural markets, and it is likely that US farmers will make a significant shift from soybeans to corn when it comes to the 2019 plantations. Meanwhile, for sugar, we believe they are at a minimum with the expectation that prices are strengthened in 2019, particularly in the latter part of the year “,

According to the entity, its analysts will be alert to 10 key aspects for the commodity markets:

  • The OPEC strategy for 2019.
  • The sulfur regulations of the IMO.
  • The impulse to LNG (liquefied natural gas).
  • The carbon prices of the European Union.
  • Commercial concerns and copper.
  • Gold and the policy of central banks.
  • The sanctions in the aluminum market.
  • The replacement of palladium.
  • The reduction of soybean area in the United States.
  • The evolution of the global sugar market.

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