• Commodity markets generally remain volatile, reflecting the uncertainty presented by the Coronavirus (Covid-19) outbreak. The most liquid markets – such as crude oil and base metals – declined noticeably as the outbreak expanded beyond China in mid-to-late February.
• In addition, crude oil markets have plunged in March, as OPEC+ could not agree to production cuts, with Saudi Arabia planning to increase output. In contrast, gold has benefited from a flight to safety.
• The broader spread of the Coronavirus increases the risk of further supply chain disruptions, as well as weaker global final consumption – ultimately negatively impacting demand for commodities.
• In annual average terms, US dollar commodity prices are forecast to fall by 15.4% in 2020 – driven by liquefied natural gas (LNG), iron ore and (to a lesser extent) metallurgical coal. A recovery in LNG prices is expected to support a 2.6% increase in 2021.
• This view is predicated on a general recovery from the Coronavirus downturn in China in Q2 and other markets in Q3.

Find out more in NAB’s Minerals & Energy Outlook – March 2020