Current panorama of the commodities market: trading opportunities in 2023

Global Commodity Market Dynamics

International commodity trade has experienced significant transformations in recent years. Between 2020 and 2022, the price index of these assets doubled, primarily driven by the energy sector (oil and gas). This phenomenon reflects not only temporary volatility but also a growing institutional and investor interest in these instruments. Governments, multinational corporations, and individual investors now recognize the profitable potential offered by this segment of the commodity market.

Market Structure: Main Commodity Categories

Energy: The Market Pillar

Energy accounts for approximately 75% of global commodity production. Three products dominate this segment: crude oil, natural gas, and coal. Crude oil and natural gas are the most traded energy commodities worldwide.

Factors influencing these prices:

• Oil: Economic cycles, geopolitical events, OPEC production policies
• Natural gas: International conflicts, weather conditions (especially European winters), reserve availability
• Coal: Energy transition towards clean sources, industrial and heating demand

Metals: Bifurcation between precious and industrial metals

Metals are divided into two categories with different dynamics. Precious metals include gold, silver, and platinum, while industrial metals encompass aluminum, copper, and iron, among others.

The London Metal Exchange (LME) is the trading epicenter, with an average volume of 3 billion tons annually, equivalent to over 15 trillion dollars in transactions.

Price determinants:

• Gold and silver: Inflation rates, financial volatility, central bank monetary policies, jewelry demand
• Copper: Industrial activity, technological development, construction, and manufacturing
• Aluminum: Production energy costs, automotive and aerospace industries

Agriculture and Livestock: Soft Commodities

This segment includes coffee, sugar, cocoa, grains (soybeans, wheat, rice, corn), and livestock (lean pork, cattle). Soybeans and corn lead in global trading volume.

Agricultural prices respond to global economic cycles, energy costs, and events such as droughts, geopolitical conflicts, or political crises in producing regions.

Current Situation: Market Analysis 2022-2023

Post-Ukrainian Market Bifurcation

Since the start of the conflict in Ukraine, prices have shown divergent trajectories. Energy prices reached historic highs, while metals and agricultural products experienced significant corrections.

Key milestones:

• Crude oil: Near $130 per barrel in June 2022, followed by a correction over 40%
• US natural gas: Peak of $10 in August 2022, an 80% drop to $2 (warmer European winter than expected)
• Non-energy commodities: 13% retreat in Q3 2022
• Metals: Pressured by economic slowdown and FED rate hikes
• Agricultural products: 11% quarterly decline, partially offset by the resumption of Ukrainian exports

Institutional Forecasts and Opportunities

The World Bank anticipated declines for 2023-2024, but analysts like Jeffrey Currie of Goldman Sachs project a 43% increase over the next twelve months, based on:

• Possible pause in interest rate hike cycle
• Reopening of China and easing of anti-COVID restrictions
• European economic recovery
• Inventories at historic lows with reduced productive capacity

The Baltic Dry Index (BDI), which monitors maritime freight costs, shows a slight recovery in recent weeks, a potential signal of increased demand in international commodity trade.

Investment Vehicles: Available Options

Energy Company Stocks

Investing in shares of exploration, transportation, storage, and distribution corporations offers indirect exposure:

• ExxonMobil (XOM.US): 300% appreciation since 2020
• Chevron (CVX.US): Over 260% performance post-pandemic
• Naturgy (GASNY.US): 38.7% appreciation over 5 years, with diversification into electricity
• Shell (SHEL.US): Over 200% jump since November 2020
• Repsol (0NOG.IL): 6.05% over five years

These stocks also generate regular dividends, combining capital appreciation with recurring income.

Futures Contracts

These binding agreements allow trading specific volumes at prices set by supply and demand at future dates. Major exchanges include CME Group (which includes CME, NYMEX, CBOT, and COMEX in the US), TOCOM in Tokyo, and LME in London.

Specialized Funds and ETFs

Exchange-traded funds (ETFs) provide diversified access without direct purchase:

• Invesco DB Commodity (DBC.US) and Invesco Optimum (PDBC.US): Both with $8 billion in assets, tracking 14 major commodities
• United States Oil Fund: Tracks WTI crude futures
• Invesco DB Base Metals Fund and SPDR S&P Metals & Mining ETF: Exposure to industrial and precious metals

The advantage lies in liquidity, ease of buying and selling, and integrated diversification.

CFDs (Contracts for Difference

A CFD is an agreement between broker and investor to exchange the price difference of an asset over a specified period. They allow exposure without physical possession, with leverage that multiplies gains and losses. They also enable short operations in bearish markets.

Strategies According to Risk Profile

) Conservative Investors

Inclusion of diversified ETFs in a portfolio as long-term inflation hedges. When currencies depreciate, food and raw materials become more expensive, allowing benefits across economic cycles.

Active Traders

Professionals can execute intraday or scalping strategies in futures and CFDs, seeking short-term gains in the commodity market through rapid price movements.

Final Considerations

The variety of instruments in the commodity market allows participation at different risk tolerance levels. Current volatility presents both opportunities and significant risks. Every operation requires rigorous risk assessment under professional advice for safe navigation of these dynamic markets.