This year has been a tough one for many commodities, mainly due to a strong U.S. dollar. Many investment analysts say the situation isn’t likely to get any easier in 2015.
West Texas Intermediate and Brent crude oil futures, for instance, have lost over 45% of their value since June this year – prompting some investors to call this jolt the “oil shock of 2014.” Plus, the steep decline in oil prices has had an impact throughout the commodities sector, with further fallout anticipated for next year.
As an asset class, commodities weakened about 12% in the third quarter of 2014, according to Morningstar. For the 12 months ended Oct. 31, the group is now nearly 7%.
In mid-December, crude-oil futures dropped below $57 a barrel, after the International Energy Agency further reduced its forecasts for global oil demand; the agency sees daily demand declining by 230,000 barrels a day to 900,000 in 2015.
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Futures for sweet crude have declined 25% since Nov. 24. These declines have occurred thanks to both the U.S. shale boom, weakening demand in Asia and Europe, and the Middle Eastern producers’ hesitancy to put a dent in the global supply glut.
“A stronger U.S. dollar and ongoing concern over a projected 2015 surplus maintained a steady downward pressure on prices,” Citi Futures analyst Tim Evans said in a recent note.
As for prices in 2015, ANZ Research has slashed its oil-price forecasts by nearly 25%. It expects Nymex crude to average $68 a barrel and Brent crude to average $71 a barrel next year.
A recent Bloomberg survey of 17 analysts, though, sees Brent sliding to $50 a barrel, down from a high of close to the $116 a barrel in June.
Analysts at Goldman Sachs see further declines in prices for oil and for other commodities with anticipated strengthening of the U.S. dollar in 2015 and weaker demand for commodities in China.
As for metals, Goldman Sachs is calling for gold to average $1,050 an ounce in 2015.
Gold futures for February traded at about $1,208 an ounce on Monday, according to Bloomberg. They have been weakening for several weeks amidst concern that the Federal Reserve is likely to raise interest rates, which would cut demand for the precious metal – seen by many as an alternative investment.
In the third quarter, gold prices dropped close to 8.5% as the U.S. economy and currency strengthened. They hit a four-year low in November.
Goldman Sachs also forecasts that copper is likely to weaken in 2014, but nickel, zinc and aluminum should outperform.