Oil and metal commodities prices under fundamental pressure

The price rise of Crude oil and metal commodities in this week is mainly due to the expected interest rate cuts by US FED next week.

✅ The price rise of Crude oil and metal commodities in this week is mainly due to the expected interest rate cuts by US FED next week. But the demand scenario and economic growth of China continues to remain under pressure and I believe that China being the largest consumer (appx.50% of world metals and 15% of world crude oil) and growth driver of metals and oil commodities would continue to struggle with its economy in 2025 also as it continues to tackle bankruptcies of big real estate and properties companies. This has weakened its banking and financial sector and as such it would be difficult for China to regain its growth momentum of 2010-2020. 

✅ Though India is the highest growing country in the world but its growth will not be sufficient to replace China’s demand and consumption volume as India’s consumption is only about 10% of China’s consumption and production. Besides, demand for oil in China would reduce further as China has become the world leader in EV (Electric vehicles) and battery technology slowly replacing fossil fuel based vehicles. 

✅ In the medium to long term, Russia’s ongoing war with Ukraine has the highest probability of escalating into full-fledged war with NATO and Europe and Israel- Hamas war also has the highest probability of escalating and spreading to full Middle East region and war with Iran. At the same time, China may end up having war with Taiwan. All these scenarios would further destabilize the economy and demand may reduce further as wars would reduce population.  

So unless and until crude oil production supply is cut by 3-4%, we may see prices remaining low in the range of USD 65-75/bbl. Similarly, metals and oil production will have to align with new normal and adjust its production downwards to match with the lowered demand. Only agriculture commodities would expect high demand growth and higher prices in future. So I believe that prices of oil and metal commodities would remain subdued in the new world scenario in medium term.