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Commodities boom is over for energy, metals and agri-products: S&P

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Energy, metals and agriculture prices have all fallen since their peak in March on fears of an inflation recession amid a slew of economic warning signs, but a commodities collapse is far from inevitable, S&P Global Commodity Insights said in a statement. a report.

The commodity market boom is over, the report said. Since early 2020, more analysts have been advocating the idea of ​​a new commodities supercycle, with an economic recovery fueled by low interest rates and pandemic-led fiscal stimulus, and as investment in decarbonization projects accelerates to meet net-zero targets.

Global manufacturing is cracking, with the July PMI data, a leading barometer of economic health, at its lowest level in two years. The US Federal Reserve has raised interest rates by 75 basis points for the second month in a row in an effort to thwart runaway inflation of more than 9 percent in June. And it’s a similar pattern of inflation risks and monetary tightening across Europe.

S&P Global Platts Analytics sees global GDP growth below 3 percent in 2022 and “the balance of risks is clearly on the downside with increasing recession probabilities” amid “very worrying” inflation trends, following 2021’s explosive 6 percent GDP growth, Paul Hickinsaid Associate Editorial Director, S&P Global Commodity Insights.

Oil and agricultural prices have also fallen from March highs, with the key Dated Brent crude benchmark and the Russian wheat price fell nearly 20 percent. Energy and agriculture have not declined at the same rate as metals given tighter supply balances, with Russia a crucial supplier of energy and crops, amid uncertainties that these crucial commodities will be exported at the same pace.

The main debate is how high prices are destroying demand amid fears of an inflationary recession and how much commodities are traded based on their own fundamentals and still a tight supply/demand balance. If oil and wheat remain high despite economic weakness, further damage could be done to the global economy and, ultimately, commodity demand, pointing to the urgency of OPEC+ to attract additional barrels and the US to strategic petroleum reserves to flow, the report said.

Dated Brent remains in the triple digits after peaking at nearly $140/b in March and well above $80/b at the start of 2022, while Russian wheat of 12.5 percent FOB in the Black Sea is also still well above above the level it is at the beginning of the year.

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