Three surprises that could inflame commodity markets in 2024
infrastructure splurge is gathering pace. Liberum, a bank, calculates that a one-percentage-point rise in its forecast for annual global GDP growth would boost commodities demand by 1.5%. Freakish weather would have a deeper impact.
Europe’s winter is not over yet, as evidenced by the cold snap that has just begun. A lasting freeze could force Europe to use an extra 30bn cubic metres of gas, or 6-7% of its usual demand, Rystad reckons. That could push the region to compete more aggressively with Asia for supplies.
A climatic surprise would be more disruptive still in the wheat markets, not least if it were to affect Russia, the largest exporter, which has had bumper harvests since 2022. The larder to cover shortfalls is emptying. Owing to rising consumption, which is set to hit records this season, global wheat stocks are already headed for their lowest levels since 2015-16.
What about war? Four-fifths of Russia’s food exports are ferried across the Black Sea, as are 2m b/d of crude. Naval tit-for-tats could jolt prices, though rising output from OPEC+, and international pressure to protect food shipments, would calm markets. Red Sea flare-ups, caused perhaps by a sustained American campaign against the Houthis, could cause a 15% spike in oil prices, says Jorge León of Rystad—though this may not last long either.
War involving Iran and other Gulf states, where most of the unused production capacity lies today, is what would really cause chaos. The potential for terrifying prices of the sorts predicted in March 2022, when barrels at $200 seemed possible, could return. It would take something extreme—or a mixture of less extreme but still unlikely events—to blindside commodity markets.
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