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Tuesday, March 5, 2024

What lies ahead for the commodities market

As global crude oil prices approach the $100 mark once again, the future of commodities markets remains uncertain. Factors such as supply chain disruptions, unforeseen events like conflicts and extreme weather patterns, and geopolitical influences, such as the Russia-Ukraine conflict, can significantly impact various commodities, including industrial and precious metals, grains, and energy commodities. Amro Zakaria, Senior Market Analyst – Mena at Forex.com, highlighted these concerns at the recent Forex Expo Dubai 2023.

During the event, Zakaria emphasized the importance of understanding the dynamics of commodities markets, given their significant role in the global economy. He identified three primary factors influencing these markets: supply chain disruptions, geopolitical influences, and inflation and interest rates.

Earlier in September, the World Bank reported a 7.8% increase in energy prices in August and an 8.2% rise in fertilizer prices. However, prices decreased in categories such as non-energy (-1.2%), food (-2.2%), raw materials (-0.6%), metals (-1.9%), and precious metals (-1.9%).Looking up at a computerized stocks-value board at the Philippine Stock Exchange

Zakaria discussed essential tools and models used for commodity price risk analysis, including technical analyses, Liquidity-adjusted VaR (L-VaR) modeling, diversification, and hedging. These tools help market participants manage risk effectively and enhance their financial performance.

For oil-producing Middle Eastern countries, demand for refined products plays a crucial role in the stability and growth of the commodities market. Global consumption of major refined products is expected to reach 69.3 million bpd by 2030, with Middle Eastern countries exporting substantial quantities. The Russia-Ukraine conflict has reshaped global oil flows, prompting Middle Eastern oil-producing countries to expand their refineries to meet growing demand. As a result, the Middle East is expected to increase its production of major refined products by 5.5% in 2023, reaching 8.48 million bpd by 2024, according to S&P Global Commodity Insights.

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