Since the beginning of the year, the dynamics of commodity prices have shown a consistent downward trend driven by various factors. The primary catalyst for this volatility has been the escalating trade tensions between the US and China. The imposition of new tariffs by both nations has not only exacerbated the economic differences between the world's two largest economies but also influenced the key financial indicators of commodity markets.

Experts at Citi Research have highlighted the anticipated further decline in prices for oil, metals, and other commodities, spurred by economic uncertainty and declining demand. Let’s delve into what is happening in the key segments.

Uncertainty in the Oil Market

According to recent data from Citi Research, the forecasted price of Brent crude for the next three months has been adjusted to $60 a barrel. Previously, expectations were more optimistic. In light of the 10% base tariff imposed by US President Donald Trump on imports and China's retaliatory measures, markets are anticipating a reduction in global trade, which in turn pressures demand for energy resources.

Key reasons for the decline in oil prices include:

- A decrease in industrial production in China, the largest importer of crude oil.

- A reduction in global business activity due to reinforced trade barriers.

- Market expectations of a slowdown in US economic growth.

This forecast amplifies fears among market players, who predict possible further corrections in the event of additional sanctions or escalation in the tariff war.

Metals Under Pressure: What’s Happening with Copper and Aluminum

Metals are also at risk. Citi Research has lowered short-term price forecasts for copper to $8,000 per ton and for aluminum to $2,200 per ton. Notably, these levels are anticipated for the first time in more than half a year.

Main Reasons:

1. Decline in Export Demand: Trade tensions, resulting from simultaneous tariffs by the US and China, impact supply chains, leading to decreased manufacturing activity.

2. Rising Inventory Levels: An oversupply is exerting downward pressure on spot metal prices.

3. Slowdown in Construction: Due to economic instability, the real estate sector in China (one of the largest consumers of copper and aluminum) is showing negative trends.

The Effect of Tariffs: Who Will Be Most Affected

The prospects for recovering commodity prices remain uncertain, especially if tariffs continue to exert systematic influence. Below are the key consequences of the current situation:

1. For the US:

   - Increased costs for all imported raw materials, potentially affecting local producers and deteriorating their product margins.

   - Higher domestic energy prices.

2. For China:

   - Economic growth slowdown due to decreased export revenues.

   - Deterioration of logistical and raw material conditions due to changes in import regulations.

3. For the Global Market:

   - Diversification of export-import flows, altering standard trade routes.

   - Reduced attractiveness of commodities as an investment asset.

Scenarios for Commodity Markets

The current situation is characterized by the fact that price movements across almost all segments depend on political factors at least for the coming months. If the trade war between the US and China continues to intensify, the likelihood of a sustained negative trend in the markets for oil, copper, and aluminum is high.

In the long term, the situation may change under the following conditions:

- Resolution of tariff conflicts through negotiations.

- Easing monetary policies by the central banks of the US and China.

- An increase in government infrastructure spending that would support demand for metals.

For now, commodity markets remain in a zone of heightened turbulence, and price declines in the coming quarters seem more than plausible.