Commodities, in general, are on course for their best annual performance in twenty years. But change is coming. Supply in many commodities is increasing and any economic slowdown, covid-related or not, will weigh on prices. A higher US dollar and more tightening in monetary policy will also play a part, strategists at ING report.

Oil market to return to surplus

“We believe that we will see oil prices easing in 2022. Our expectation is that strong non-OPEC supply growth combined with a further easing in OPEC+ supply cuts will tip the global oil market back into surplus next year. As a result, we see ICE Brent averaging $76/bbl over the full year of 2022. The Omicron variant is a clear downside risk.”

European gas tightness to persist

“Concerns over low gas storage levels in Europe have not eased and this is likely to be a concern through the winter. These worries over tightness should mean that prices remain elevated, yet volatile for the remainder of this year and into early next year. We expect that European gas prices will start to ease once we are past the peak of winter demand, although we still believe that prices will remain seasonally high over much of 2022.”

Aluminium to stand out in metals

“Most metal markets should be better supplied in 2022 which suggests that prices will trend lower. Monetary tightening and a stronger US dollar should provide some further headwinds. However, aluminium is likely to be the outlier. While we will see some smelters bringing back capacity over the course of 2022, it will not be enough to alleviate the tightness in the market. As a result, we expect prices to average close to $3,000/t in 2022.”

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