Commodities

The main factors that affect commodity prices are supply and demand, geopolitical events and economic indicators.

1. Supply and demand

During periods of economic growth, industrial production increases, leading to higher demand for energy commodities. As a result, the price of oil and natural gas goes up.

Seasonal changes also play a significant role. For instance, colder weather increases the need for natural gas, raising its price. On the other hand, warm winters reduce demand, causing prices to fall.

On the supply side, prices are affected by production levels. If a commodity is overproduced, its supply will exceed market demand, which causes its price to drop. Conversely, disruptions in production caused by natural disasters, technical failures or labor strikes can create shortages, leading to price spikes.

2. Geopolitical events

Conflicts, political instability and sanctions in key producing countries heavily influence commodity prices. These disruptions in oil-producing regions can limit supply, driving prices higher.

3. Economic drivers

Energy policies significantly impact commodity prices. For example, OPEC production cuts limit the global oil supply, often leading to price spikes.

GDP growth, employment rates, and inflation in major oil-consuming nations like the United States, China and Japan directly influence demand. Strong economic performance in these countries increases industrial activity and energy consumption, which boosts prices.

Currency fluctuations also play a crucial role, as most commodities are priced in USD. A stronger dollar reduces global purchasing power, pushing prices down, while a weaker dollar makes commodities more affordable internationally, boosting demand and raising prices.

Tips for traders:

Keep an eye on geopolitical and economic events.

Trade on Brent oil and natural gas during periods of inflation or economic uncertainty, as they tend to retain value more than other assets.

Use technical analysis to identify price trends.

Diversify your portfolio to mitigate risks.