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Investment-Led Recovery Lends Support

Key takeaways

  • Citi analysts expect strong oil demand growth and OPEC supply restraint to support oil prices in the first half of 2018 but the return of OPEC and Russia supply to weigh on oil prices in the second half of the year.
  • Gold prices have peaked and upside seems limited on the back of investor optimism for US tax cuts and markets expecting a more hawkish Federal Reserve.
  • Improved demand growth and supply concerns may drive copper prices higher while iron ore supply may struggle to meet the pickup in demand.


With investment and trade growth supporting the broad-based recovery in the global economy, Citi analysts believe that this is more supportive of commodities than a consumer-led recovery.

The outlook for China remains key for commodities. While China is likely to meet its growth targets, it is uncertain how commodity intensive China’s growth will be. Citi’s base case is that China-sensitive commodities such as base metals and bulk commodities may enjoy higher demand during 2018, as China seeks both supply-side and environmental reforms.

Historically, while a weaker US dollar (USD) has lifted commodity prices, fundamentals appear to be more important in 2018 as the correlation between commodity prices and the USD weakened marginally throughout 2017, even falling to zero in the quarter ending September.






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