Haworth notes that the U.S. government, which tapped its strategic petroleum reserve in times when oil prices soared, is now working on rebuilding its reserve. “The demand created by refilling the reserve is providing a floor for oil prices,” says Haworth. The future of oil production and demand raise questions about the direction going forward.
Saudi Arabia led an OPEC production cut hoping a price increase would result. Now the Saudis appear ready to boost output. President-elect Donald Trump has promoted stepped-up U.S. drilling activity. However, higher production could result in an oversupply, dampening prices. If oil prices drop from current levels, drillers may choose to slow production. In addition, says Haworth, oil rig obsolescence is another limiting factor. “Many oil rigs are old and need to be retired, and there’s not a major push to build more to replace that capacity,” says Haworth. “If producers choose to add more rigs, potential oil price ramifications could make the economics less attractive.”
Commodity prices flat to lower
The broad Bloomberg Commodity Index is down 1.9% for the year (through November 13, 2024).3 Agricultural commodity prices have declined year-to-date, with futures market corn prices down close to 10%, wheat contracts nearly 14% lower, and soybean prices down 29%.4 Lower prices for raw agricultural products contributed to a slowing of food price inflation.
Metals prices can be considered in two categories – precious metals such as gold and silver, and industrial metals used in manufacturing, such as nickel and copper for electric vehicle batteries. Gold prices dropped to a low of $1,831/ounce in October 2023, but by the end of October 2024 rose to more than $2,800/ounce, a jump of 53% in less than one year. However, in November’s first half, gold prices dropped by 8%.5