Bank of America Outlook 2025 Commodity Market: Tariff Shadows Loom Over the World, Crude Oil Enters Surplus Cycle, Gold "Shines Alone" Soaring to $3,000

Under the dual pressures of weak global economic growth and potential risks from U.S. tariff policies, what challenges will commodities face next year?

The analysis team of Francisco Blanch at Bank of America Merrill Lynch released the "2025 Commodity Outlook" report on November 24, indicating that trade wars and a stronger dollar may lead to a decline in commodity prices, but the differentiated performance will bring more opportunities and challenges for investors.

It is expected that due to the growth of non-OPEC supply, the global oil market will experience oversupply in 2025, with Brent crude oil prices likely hovering around $65 per barrel. The growth of U.S. natural gas supply and demand will further tighten inventories.

Base metals may experience price fluctuations amid supply-demand differentiation, while gold is expected to strengthen due to macro uncertainties, with a target price set at $3,000 per ounce. Copper and aluminum prices may decline in the short term, then rise in the second half of the year.

Oil Market: Non-OPEC Supply Growth Dominates the Market, Overall Demand Growth Weak

Bank of America Merrill Lynch predicts that global GDP will grow by 3.3% in 2025 and 2026. Global trade tensions may weaken economic activity in the first half of 2025 and harm demand for most cyclical commodities such as oil and industrial metals. Overall, the main tone of the global energy market in 2025 is oversupply and slowing demand growth.

Due to a significant increase in production from non-OPEC countries, coupled with OPEC+ potentially releasing more supply, the oil market may enter an oversupply cycle, with the average annual Brent crude oil price expected to be $65 per barrel and WTI at $61 per barrel.

Specifically, the United States, Brazil, Canada, and Guyana will be the main sources of oil supply growth in 2025. The recovery of U.S. shale oil production and new capacity in the Gulf of Mexico will drive a growth of 350,000 barrels per day in U.S. production for the year.

Additionally, Brazil's pre-salt oil field projects will concentrate on production from 2024 to 2026, including several large FPSOs (Floating Production Storage and Offloading units) such as Mero 3 and Buzios 7, which are expected to contribute about 300,000 barrels per day of new supply from Brazil. Guyana's Yellowtail project is expected to come online in the second half of 2025, adding 120,000 barrels per day of new capacity for the country.

This will put pressure on OPEC+ from the increasing production trends of non-OPEC countries. Although these countries may maintain market balance through production adjustments, their influence is gradually being weakened. The report predicts that OPEC+ supply will only increase by 290,000 barrels per day in 2025, far below the 1.4 million barrels per day increase from non-OPEC sources

On the demand side, the slowdown in global economic growth, weak recovery in emerging markets, and a strong dollar are all suppressing oil demand. Bank of America Merrill Lynch predicts that global oil demand growth will only be 1.1 million barrels per day in 2025, which is far from the supply increase from non-OPEC countries. Although geopolitical tensions in the Middle East may support oil prices in the short term, this impact is unlikely to offset the pressure from supply and demand fundamentals.

Natural Gas: Tight Supply and Demand Push Prices Up

In contrast to the weakness in the crude oil market, the natural gas market may become a highlight in 2025. Bank of America stated that potential future policies from Trump may include the restoration of natural gas export license rounds, and the Federal Energy Regulatory Commission has already approved a large number of liquefied natural gas export facilities.

Driven by increased winter demand and infrastructure development, the average price of natural gas at the U.S. Henry Hub is expected to reach $3.33/MMBtu for the year, higher than the levels in 2024.

The LNG (liquefied natural gas) market is further tightening due to increased import demand in Europe, especially in the case of cold weather or geopolitical escalation, which may trigger short-term price increases.

In addition, the energy transition also supports the natural gas market. With the growth in demand for LNG trucks and gas-fired power generation, the market position of natural gas is becoming increasingly important in the adjustment of the energy structure.

Metal Market: Energy Transition and Supply Shortages Shape Price Volatility

The metal market faces a trend of differentiation in 2025: The long-term demand growth brought by the energy transition is offset by supply chain tightness, causing some metal prices to seek support amid volatility.

"Trade and tariffs create a bearish backdrop for base metals, while Chinese stimulus measures may partially offset this impact."

Amid macro uncertainty and risk aversion, gold remains one of the most attractive precious metals in 2025. Bank of America Merrill Lynch predicts that although a strong dollar and rising interest rates will suppress gold prices in the short term, gold prices will break through $3,000 per ounce in the second half of the year due to rising global debt levels and increasing macro risks.

Bank of America pointed out four key policy areas, all of which will have a direct impact on gold through interest rates and the dollar:

• Deregulation (bearish for gold): A broad deregulation, including in the energy and financial services sectors, may become a tailwind for economic growth, reflected in rising interest rates
• Fiscal Policy (Bearish for Gold): The personal tax cuts in the Tax Cuts and Jobs Act may be extended, and additional tax cuts may now be implemented, which will moderately boost short-term growth and put upward pressure on interest rates.
• Tariffs (Bearish for Gold): After Trump's inauguration, tariffs on his country may significantly increase in the short term. There are concerns that if the domestic currency is under tariff pressure, central banks in emerging markets will lack interest in continuing to accumulate gold.
• Federal Reserve Rate Cuts (Bearish for Gold): Assuming the economic fundamentals remain solid, if significant tariff increases are announced, the Federal Reserve may pause rate cuts. Tightening immigration flows may pose additional upward risks to inflation.

The performance of silver prices is also worth looking forward to. Driven by industrial demand such as photovoltaic panels, silver prices are expected to rise from $30/ounce to $40/ounce.

Bank of America pointed out that copper and aluminum are the core beneficiaries of the energy transition, especially driven by demand for electric vehicles, solar energy, and grid upgrades, these two metals may see a price rebound by 2025. Although copper may be under pressure due to weak demand in the first half of the year, prices are expected to rebound from $8,500/ton to $10,500/ton as the global economy recovers in the second half of the year. By 2025, the aluminum market is expected to enter a supply deficit phase, with prices potentially breaking through $3,000/ton.

Agricultural Market: Weather and Policy Risks Intertwined

The agricultural market may be one of the most volatile sectors among commodities. The report indicates that corn, wheat, and soybean prices face downward pressure in the short term due to weather factors and weak demand. Additionally, if the U.S. restarts the trade war with China, it could significantly impact the prices of U.S. soybeans. In contrast, sugar may have some upward potential due to possible supply shortages