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Report12 January 2018Updated one week ago

Ten things to watch in commodities in 2018

Commodities have started 2018 on a strong footing and oil prices have rallied to levels last seen in 2014. The key event this year will be how OPEC go about exiting their output cut deal, if at all but here we look at all the major themes set to dominate the market in 2018

Executive summary

It has been a strong start to the year for the oil market. This week ICE Brent briefly rallied above US$70/bbl, territory the market has not seen since 2014.However the fundamental outlook for oil remains bearish, and we expect prices to weaken through 2018.

For base metals, the outlook over 2018 remains constructive, with most metals continuing to see tightening balance sheets. Production capacity cuts in China should remain supportive for prices, while for copper, there are a number of labour contract negotiations in Chile and Peru this year, and so like 2017, there is the risk that we see disruptions to supply.

While for agricultural commodities, it does appear that most markets are still dealing with large inventory levels, which should mean limited upside to prices. However, the key risk to this view is La Nina, a weather event that can cause disruptions to crops. Currently, NOAA expects that there is more than an 80% chance that La Nina conditions last through until the end of the northern hemisphere winter.

Here are ten themes we’ll be looking at in 2018:


1. OPEC and non-OPEC deal exit strategy
2. Global oil demand growth and market balance
3. LNG supply from Australia and the US
4. Coal plant closures
5. Chinese winter capacity cuts
6. Glencore zinc mine restarts
7. Potential copper mine disruptions
8. Palladium substitution risk
9. “La Nina conditions are present”
10. Brazilian sugar/ethanol dynamic

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