Five factors that will affect the outlook for commodities in 2025

Investing.com — The outlook for commodities in 2025 hinges on five key factors, as mentioned by analysts at BofA Securities in their year-ahead commodity report. 

These factors, each with vital implications for market dynamics, range from macroeconomic conditions to supply-demand fundamentals across sectors. 

Geopolitical tensions and trade policies

Trade wars and geopolitical uncertainties will continue to cast a shadow over global commodity markets. 

Analysts predict that tariffs and other trade barriers, especially involving the United States and its trading partners, could dampen global industrial activity. 

The strong U.S. dollar, supported by higher interest rates, further exacerbates this trend, making commodities more expensive in emerging markets. 

These dynamics are expected to impact demand, particularly in sectors like industrial metals and agricultural products.

Supply dynamics in energy markets

Oil markets are projected to remain oversupplied in 2025, with non-OPEC supply growth outpacing demand. 

Increased production from the U.S., Brazil, and Canada, alongside additional OPEC+ barrels, is likely to exert downward pressure on oil prices, with Brent crude forecast to average $65 per barrel. 

Meanwhile, U.S. natural gas could outshine oil, buoyed by reduced capital expenditures and robust demand for liquefied natural gas. 

However, geopolitical risks, such as potential disruptions from Middle Eastern tensions, remain a critical variable.

Energy transition and metals demand

The ongoing energy transition, with increasing investments in electric vehicles and renewable energy infrastructure, is expected to underpin demand for critical metals such as copper, aluminum, and silver. 

However, short-term price volatility is likely as trade disputes and a weaker Chinese economy create headwinds. 

Despite these challenges, tight supply conditions, especially in copper and aluminum markets, could support a recovery in prices in the latter half of the year.

Agricultural market pressures

Agricultural commodities face a mixed outlook, with grains such as wheat and corn remaining soft due to record crop outputs and weaker global demand. 

Conversely, sugar and natural gas have the potential for upward momentum. The impact of climate and weather patterns, coupled with the potential resurgence of trade tensions, particularly between the U.S. and China, adds another layer of uncertainty to the agricultural sector.

Monetary policy and macroeconomic trends

The trajectory of U.S. monetary policy, including expectations of further rate cuts, plays a pivotal role in shaping commodity markets. 

While lower rates could support gold and silver by making them more attractive as safe-haven assets, the strong dollar continues to challenge commodities broadly. 

Global GDP growth, projected at 3.3% for 2025, adds a cautiously optimistic backdrop, though risks persist from inflation and economic slowdowns in major markets.