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ChAI's 2024 Outlook for 5 Key Commodities

Dec 21 2023

2023 has marked a significant shift in the commodities market compared to the tumultuous years of 2021 and 2022, which were characterised by extreme price volatility due to pandemic-induced supply and demand uncertainties. This year, we've witnessed unique trends across various commodities, and in this article, we'll explore the developments and driving factors of five key commodities—Brent Crude Oil, Natural Gas, Copper, Wheat, and Coffee—along with ChAI’s forecasts for 2024.

Brent Crude Oil

The story of crude oil in 2023 has been about the underestimated lack of oil demand countering OPEC's efforts to raise prices through production cuts. The year kicked off with expectations for a post-pandemic economic boost from China, which didn’t materialise, leading to lower than anticipated demand for oil. Brent prices averaged around $80 in the first half of 2023, a drop from the $95 average of the final 6 months of 2022. In the latter half of this year, OPEC's production cuts, particularly from Saudi Arabia and Russia, began to influence the market. Brent prices saw a climb from the mid $70s in June to above $95 by late September. This upward run was followed by a fall in October due to a major bond market sell-off, and further fluctuations followed due to the Israel/Palestine conflict and ongoing demand concerns.

ChAI’s 2024 forecast for Brent is cautiously neutral, with an average price expectation of $81 per barrel, reflecting recent market dynamics and the global economic situation. In contrast to this time last year, when ChAI was notably more bearish than many bank outlooks, there is greater consensus on the fragility of oil demand going into 2024. Goldman Sachs, who predicted an average of $110 for 2023, also expects Brent to average at $81 in 2023, while JP Morgan has it slightly higher at $83. ING also expects Brent to ‘remain trading in the low $80s’ in the first half of next year, but predict that it will rise to $91 for the second half of the year as part of their ‘cautiously optimistic’ 2024 commodities outlook.

The data within ChAI’s models is predominantly neutral for the next year, however it is worth highlighting the recent build in aggregate short positions in Brent. Since the week of November 28th, Non-Commercial Short positions have more than doubled from 49.317k to 103.913k in the week of December 12th. The ups and downs of crude oil prices are exacerbated by speculative money, and this building of short positions tees up the market for a short squeeze. If prices rise in the short term, speculators will be forced to cover their short positions and could provide additional momentum for a rally.

In 2024, the balance between weak demand and reduced supply will again be a key theme for oil markets. It remains to be seen whether OPEC can still raise prices effectively through further cuts. Conversely, the effects of the rapid interest rate hiking cycle is yet to be fully realised and demand may fall further yet before recovering. While fears of a particularly bleak recession have been allayed, the global economy remains frail and, as JP Morgan noted, a “mild recession is not a mild event”. In the short term, the main risk to watch is the recent attacks on ships in the Red Sea by Houthi rebels, which could cause a spike in shipping rates and therefore oil prices.

Brent 2024 forecast

Natural Gas

The European natural gas market in 2023 has been significantly calmer than the previous two years. The transition to a post-Russian gas era and a mild winter helped Europe to start the year with record high gas storage levels, leading to a period of stability as prices gradually declined through June.

In August, the market faced challenges with the threat of strikes at LNG projects in Australia, which sent prices upwards and underscored Europe's dependency on diversified gas imports in the absence of Russian flows. Moreover, the reaction to the potential strike action in Australia revealed how Europe’s gas market has been scarred by the price shocks of the past few years. Traders now fear that every price increase could be the start of the next rally to a new record high, and multi-percent daily price swings have become unremarkable. It remains to be seen how long the market will take to shake off this twitchiness.

The threat of Australian strikes loomed over markets for several weeks before prices peaked in mid-October combined with the conflict in the Middle East and sabotage to a gas pipeline between Finland and Estonia to send prices up above €50/MWH for the first time since April. Since then, however, prices have again settled into a downward trend, with plentiful European storage reducing the risk of major incidents this winter.

ChAI’s average forecast for TTF in 2024 is €35/MWH, with prices expected to decline slightly from the current level into the middle of the year before picking back up for next winter. One variable for European gas prices is the amount of high-energy industrial sites that have been mothballed over the past few years. There is a huge quantity of dormant gas demand on the continent which would boost prices should the industrial sector be revitalised in 2024.

Natural gases


Copper began 2023 with a bang, surging over 12% over the first 3 weeks of January The rally, which occurred across the base metal complex, was driven by the expectation of renewed demand from China. However, the surge was short-lived as copper prices settled into a more subdued pattern for the rest of the year, fluctuating between $7800 to $8800.

Beijing’s inability to revitalise its ailing property and construction sectors has undermined copper prices, while the pace of electrification has slowed across Europe and the US. This shift towards electric power, and the associated demand for copper, will continue to be a key theme for the red metal going forward. However, the inflationary environment of the last year has placed consumers under significant cost pressure which has dented appetites for electric vehicles in the West.

The success of electric vehicle manufacturers in China’s domestic market, meanwhile, has been a source of stable demand for copper this year. Following 2022, a year in which around 60% of total EVs were manufactured in China, there has been another increase in production quantities. Approximately 25% of all vehicles purchased in China this year are EVs, more than in any other region, while for November the figure was closer to 40%, according to the China Passenger Car Association. In the absence of the country’s property sector, this exceptional demand growth from China’s electric vehicle industry has provided support for copper prices this year.

Concerns about the future supply of the red metal linger. The Cobre Panama mine, operated by Canadian company First Quantum Minerals, was closed by the Panama government following massive protests by environmental activists and indigenous groups. The closure of the mine, which contributed to around 1.5% of global copper production and 5% of Panama’s GDP, signals the uncertain future supply of the metal which is indispensable for widespread transition away from fossil fuels.

ChAI’s forecast for 2024 has copper averaging at $8570 over the course of the year. Prices are expected to rise in Q1, before dipping in the middle months of year, before finishing the year nearer the $8700 mark. As with energies, the upside potential of copper is heavily reliant on China. As per ING’s 2024 outlook, there is less optimism about the nation’s property sector next year which suggests “there will not be a significant recovery in metals demand.” Indeed, Focus Economics suggests that base metals prices will in fact decline by 3% in 2024 versus 2023, but similarly notes that “further Chinese stimulus measures [provide] a key upside risk.”


Wheat prices in 2023 experienced a general downward trend from the highs following Russia's invasion of Ukraine in 2022. In the first half of this year, several extensions to the Black Sea grain deal helped to ease supply concerns, bringing prices down. Meanwhile, a bumper Russian wheat crop entered the market and further suppressed prices. Russia is expected to ship a record 46 million metric tons of the 2022/23 wheat crop, with an additional 3 million metric tons expected next year.

Volatility increased in July when the Black Sea initiative finally collapsed on Russia’s withdrawal, but by early August prices had settled lower once more. Strong harvests in the northern hemisphere served to alleviate the supply concerns of the previous two years and bring prices down to below the $6 mark by the end of Q3. By mid-November, wheat prices were less than half what they had been 18 months prior. In recent weeks, wheat prices have climbed back above the $6 mark on the back of unusually high purchases of US wheat by China, with 1 million tons bought in a single week.

ChAI’s average forecast for Wheat in 2024 is $6.06 per bushel, with prices climbing in the middle of the year before settling back towards the $6 mark in the final quarter. In their 2024 outlook, the World Bank stated that “agricultural prices are expected to fall by a further 2 percent in 2024”, while JP Morgan has an average prediction of $6.33 per bushel. It is worth noting that, while global wheat production has recovered from the relatively fallow 2021 and 2022, stocks have been drawn down significantly during this time. As a result, there is less of a buffer should supplies be impacted again next year. One key factor to watch in this regard, particularly in Australia and the United States’ wheat growing regions, is El Niño. While this will be an upside risk factor in grains markets, the warm weather phenomenon will likely be the dominant narrative in soft commodities next year.

Wheat farming


Coffee prices, as with sugar and cocoa, have defied broader commodity trends, surging due to dry weather conditions linked to the El Niño cycle. Both arabica and robusta beans have experienced significant price increases, with market dynamics affected by climate impacts in major producing regions such as Brazil, Central and South America, and Southeast Asia. Since January, arabica prices have climbed by over 35% while robusta prices have climbed by over 55%, though the two markets have enjoyed different patterns during the intervening months.

El Niño will be the dominant theme for soft commodities next year. Brazil is the largest producer of both arabica and second largest for robusta beans, so the weather conditions there will affect the markets for both beans. Other key arabica producers are primarily based in Central and South America, such as Colombia, Peru and Honduras, although Ethiopia is a notable exception to this rule. During an El Nino event, these countries can often face reduced precipitation leading to drought conditions, which stresses the coffee plants and can lead to smaller yields with lower-quality beans.

Robusta beans, or at least those which are not grown in Brazil, are typically grown in south-east Asia, with Vietnam the leading producer and India and Indonesia also significant contributors. During El Nino, these regions can face drier conditions which are detrimental to the development of coffee trees; drought particularly impacted robusta production in Vietnam during the 2015-16 El Nino.

Aside from both current and forecast weather conditions, coffee prices also found support in Q3 2023 from changes to ICE rules on coffee inventories which ban the resubmission of old coffee beans. A loophole previously existed whereby sellers could avoid age penalties by removing the beans from an exchange warehouse and then submitting the same beans again as a fresh crop. This change, now in force, saw stocks of both arabica and robusta beans held in ICE warehouses decline to five year lows in recent months.

ChAI’s 2024 forecasts for arabica and robusta coffee are 210 c/lb and $2708/t, respectively. The models suggest different trajectories for each grade, with arabica expected to soften in late Q1 before strengthening, while robusta prices may peak in Q1 and then decline. Weather conditions and policy changes will continue to influence the coffee market significantly.

2023 has been a year of recalibration in commodities, with an intricate mix of geopolitical, environmental, and economic factors shaping the development of each market. As we look towards 2024, these themes and the myriad of factors which inform will continue shaping the commodities landscape.

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