Commodities weekly: metals and softs rise in August as energy and grains slide

Energy: rising supply and macroeconomic headwinds

Crude oil prices have struggled in August, with Brent and WTI both down more than 7% and trading near two-month lows. The International Energy Agency’s latest report cut its demand growth forecast for 2024, citing weaker industrial activity and slower transport fuel consumption. At the same time, OPEC+ has reaffirmed plans to fully unwind its voluntary production cuts by September, bringing barrels back into a market that has started to show signs of a surplus.

However, it is worth noting that only a relatively small part of the 2.5 million barrel increase that the eight OPEC+ members have agreed to has so far been delivered. Partly due to restraint from producers that exceeded their quotas in recent months, while some producers have struggled to increase output, and finally due to strong summer demand among producers reducing what was available for exports. In addition, prices have held up relatively well due to concerns about secondary sanctions on Russian supply and Chinese stockpiling, which according to the IEA, built by around 900,000 barrels per day in the second quarter.

Notoriously volatile US natural gas is one of the weakest performers this month, down more than 8%. Storage injections continue to outpace the five-year average, leaving inventories 6.6% above normal levels for this time of year. Without a significant late-summer heatwave or major hurricane disruption to Gulf Coast production, the ample storage cushion will limit upside, though weather-driven volatility could reassert itself quickly.

Precious metals: silver outshines gold

Gold initially traded lower after a stronger-than-expected US PPI print, on speculation it may dampen rate cut expectations by pointing to a potential upside in July’s Core PCE inflation, likely keeping the Fed cautious. Rising producer input costs risk either squeezing company margins or being passed through to consumers, adding upward pressure on CPI. However, the data does not change our long-held bullish view on gold, as the FOMC will ultimately have to balance inflation control with economic support.

For now, however, gold remains well and truly stuck in a USD 200 range centred around USD 3,350. Still, underlying ETF demand remains firm, rising to a two-year high at 2,878 tons (Bloomberg), suggesting that the market’s longer-term bullish narrative—built around eventual Fed easing and lingering stagflation risks—is intact. The near-term focus will be on the July Core PCE release and its implications for September’s FOMC meeting, and also the annual gathering of central bankers at Jackson Hole from 21–23 August.

Industrial metals: policy noise fades, fundamentals regain focus

Copper has steadied after July’s tariff turmoil, which saw US prices slump relative to London as traders reacted to the prospect of tariffs on key forms of imported refined metal. Clarifications and partial exemptions have helped narrow the Comex–LME spread, shifting attention back to fundamentals. China’s latest trade data hinted at some stabilisation in imports, while mine supply issues in South America remain on the radar.

Grains: WASDE reshapes the landscape

The USDA’s August WASDE report jolted the grains market. Corn futures dropped sharply to contract lows after the agency projected a record 16.7 billion bushel harvest, driven by expanded planted acreage and favourable summer weather. Higher ending stocks forecasts reinforced the bearish tone, and the futures curve has shifted to a more comfortable carry structure, which inadvertently supports speculators already holding an elevated net short position.

Soybeans moved in the opposite direction, supported by a smaller-than-expected crop estimate and tighter balance sheet. While gains have been modest compared with the sell-off in corn, the market is holding a risk premium into the South American planting season, where early weather developments will be key. In addition, ongoing trade talks with China remain on the radar, not least after President Trump urged China to quadruple their purchase of US-produced beans.

Wheat followed corn lower, also hitting a contract low, with ample global supplies—particularly from the Black Sea and Europe—keeping export competition intense. Quality concerns in parts of Europe have provided some localised support, but not enough to offset the overall bearish supply picture, which in the short term could lead to lower supply as farmers, frustrated with low prices, hold back supplies.

Softs: coffee takes the crown

Arabica coffee is the clear standout in August, rallying more than 10% month-to-date. The move has been driven by a combination of Brazilian weather concerns, low certified exchange stocks, and some tariff-related uncertainty adding to speculative interest. The market remains sensitive to shifts in Brazil’s weather outlook and export pace.

Sugar has also posted modest gains, underpinned by policy uncertainty in India, where decisions on export quotas could tighten global supply. Output from Brazil’s Centre-South region has been robust, but the balance between strong production and export restrictions elsewhere is keeping prices supported.

MacroVoices Podcast

Earlier this week, I joined the MacroVoices Podcast to discuss recent developments across the commodities sector and explain why we maintain a long-term bullish outlook. We argue that we are at the early stages of a new super-cycle, driven by global trends such as the energy transition, deglobalisation, defence spending, de-dollarisation, demographics, urbanisation, and climate change—unfolding at a time when ongoing underinvestment in long-cycle projects lags what may be required. Link to the podcast here and on YouTube here.