Commodities cannot continue to shrug off headwinds

Growth in China’s economy has slowed sharply and US interest rate expectations have jumped but commodity prices continue to hold up well. In some cases, constrained supply explains the resilience in prices and, in others, there are fears of supply disruption associated with mounting geopolitical tensions. However, we remain of the view that commodity prices will ease back in the second half of this year as supply bottlenecks ease and slower economic growth weighs on demand for raw materials. That said, we do not envisage a return to pre-pandemic prices any time soon. Looking ahead to next week, there are few major data releases but markets will continue to monitor developments along the Ukraine border and the talks between Iran and the West. Although there appears to have been progress in the nuclear talks with Iran, there remain significant hurdles to overcome. We are not factoring in a lifting of US sanctions on Iran into our oil production forecasts just yet.