Amid the pressures of subdued global economic growth and uncertainties stemming from U.S. tariff legislation, the commodity market is set to navigate a challenging landscape in 2025. Bank of America's analyst team, led by Francisco Blanch, recently published their "2025 Commodity Outlook," shedding light on the potential dynamics affecting commodities.
"Trade wars and a stronger dollar may lead to a decline in commodity prices," said Blanch. However, he noted that differing performance across various commodities could present both challenges and opportunities for investors.
The report anticipates that the global oil market will enter a phase of oversupply in 2025, primarily due to increased production from non-OPEC sources. Forecasts suggest Brent crude prices will stabilize around $65 per barrel as the market adjusts to these new realities. This scenario is supported by significant contributions from nations like the United States, Brazil, Canada, and Guyana.
“Due to a significant increase in production from non-OPEC countries… the oil market may enter an oversupply cycle,” stated the report. In this context, U.S. shale oil production and Gulf of Mexico contributions are set to increase by approximately 350,000 barrels per day.
Brazil's ongoing pre-salt oil field initiatives, including major Floating Production Storage and Offloading units, are expected to yield an additional 300,000 barrels per day. Simultaneously, Guyana's Yellowtail project aims to enhance the country's supply by around 120,000 barrels per day in the latter half of 2025.
However, this influx of supply puts OPEC+ at risk of losing its influence. The report suggests that while OPEC+ might increase its output by 290,000 barrels per day, it still pales in comparison to the anticipated 1.4 million barrels per day surge from non-OPEC nations. As Blanch pointed out, the demand side faces challenges from global economic slowdown and a strong dollar, which are all factors suppressing oil demand.
"Geopolitical tensions in the Middle East may support oil prices in the short term, but this impact is unlikely to offset the pressure from supply and demand fundamentals," Blanch elaborated. With a projected oil demand growth of just 1.1 million barrels per day, the disconnect between supply and demand is stark.
In contrast to crude oil, the natural gas market emerges as a bright spot for 2025, driven by tighter supply and increasing demand. The report indicates that the average price of natural gas at the U.S. Henry Hub is expected to rise to $3.33/MMBtu.
"Potential future policies from Trump may include the restoration of natural gas export license rounds," noted Bank of America’s analysis, amidst expectations of further infrastructure development and increased winter demand.
Meanwhile, geopolitical factors, particularly in Europe, are propelling demand for liquefied natural gas (LNG), which could lead to short-term price surges during colder periods or geopolitical escalations. Moreover, the ongoing energy transition — marked by demand for LNG trucks and gas-fired power generation — is solidifying natural gas's role in the evolving energy landscape.
The report also examines the metal market, predicting volatility in prices influenced by the energy transition and supply chain challenges. "The long-term demand growth brought by the energy transition is offset by supply chain tightness… causing price fluctuations," explained Blanch.
As commodities grapple with these evolving dynamics, investors will need to navigate a landscape where some sectors may thrive while others could lag. Gold is projected to be the standout as macro uncertainties prevail, with a soaring target price set at $3,000 per ounce — indicating its role as a safe haven amidst market turmoil. Overall, navigating the 2025 commodity market will likely require astute monitoring of global economic signals and geopolitical developments, as the balance between supply and demand continues to shift.