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Commodity Trends

Monthly Update: Oil Market Volatility Is Rising

October 25, 2023
Marc-Antoine Dumont, Economist • Florence Jean-Jacobs, Principal Economist


  • The war between Hamas and Israel has caused tensions in the Middle East to spike. The risk that the conflict could escalate—particularly with Iran—and disrupt global oil supplies pushed prices up, with West Texas Intermediate (WTI) briefly hitting US$90 per barrel. That said, the expected contraction in demand in Q4 2023 and Q1 2024 should bring prices back down. Our increase to the year-end WTI price target to US$82 per barrel reflects a risk premium rather than any change in fundamentals.
  • China's better than expected third-quarter economic performance paints a more encouraging picture for industrial metal demand. However, given the lack of a sustained recovery in the housing sector or substantial new stimulus measures, it may not be enough to have a major impact on prices. This situation, combined with economic challenges elsewhere in the world, points to a slight contraction in base metal prices.
  • We think the price of gold will decline in 2024, as the US economy's successful soft landing is likely to offset the impact of expected lower bond yields. In addition, the current high price of gold, combined with unfavourable exchange rates for the Chinese renminbi and Indian rupee against the US dollar, is likely to curb demand for use in jewellery and therefore put downward pressure on gold prices. However, gold may become more expensive in the short term given the recent increase in geopolitical tensions.
  • After two years of major volatility, lumber prices are stabilizing above pre-pandemic levels. Forest fires and the Vancouver port strike triggered some uncertainty over future supply, which caused prices to spike in July, but the situation has since stabilized. The global economy will exert downward pressure on lumber demand over the coming months, but prices are likely to rise again in 2024, amid lower inventories and less subdued economic growth in North America.
  • The war in Ukraine remains a key factor in grain price volatility. Russian attacks on ports and grain infrastructure could hamper Ukraine's long-term export capacity. However, Brazil's abundant corn harvest should pull prices down in the short term, while the scenario for soybeans and wheat is more balanced.

Main factors to watch

  • Energy: Oil price forecasts revised higher to reflect rising tensions in the Middle East.
  • Industrial metals: No change.
  • Precious metals: No change.

Jimmy Jean, Vice-President, Chief Economist and Strategist • Marc-Antoine Dumont, Economist •
Florence Jean-Jacobs, Principal Economist

Note to readers: The letters k, M and B are used in texts and tables to refer to thousands, millions and billions respectively. Important: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.  Copyright © 2023, Desjardins Group. All rights reserved. Desjardins Group. Copyright © 2023, Desjardins Group. All rights reserved.