Supercycle over but commodities not forgotten

Since the start of the year, movements in crude and gold prices have caught the attention of investors.

Crude oil
McNew/Getty Images

The price of energy and gold has been moving higher for various reasons; from the cold weather, where a surge of demand pushed up prices, to the improvement of global economic growth this year.

WTI prices were trending lower at the end of last year on increasing stockpiles; this jump has been attributed to the cold weather disrupting production at a time when demand is rising. The EIA lowered forecasts for US oil production this year and next, after the ‘severe weather this winter has caused temporary slowdowns in completing new wells’.

The US oil production of fracking has given a boost to the economy. This revolution in the US oil production, which has changed the US from being oil dependent (importing 60% of oil) to almost independent, has prompted some to seek a removal of restriction on exports of oil. 

The call for change is also in Brent, where Platts expect crude from countries such as Africa and Russia to be added onto the benchmark in the future. Brent has been trading in a tight range since last December and this change in stability of the prices has prompted observers to note that the volatility which was previously embedded in Brent has dissipated. 

Brent was trading between wide ranges of US$88 a barrel to US$128 a barrel in the past couple of years has now stabilised a tight range of US$105-110. The change in trend has most expecting it to stay this way in the short term. There is concern that supply disruptions in Nigeria and Libya will push prices higher as global demand of oil increases.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Find an article

  • Sectors

    Find out more about other markets that we offer, from how they work and what they cover to how you can spread bet and trade CFDs on them.

  • Trading CFDs

    In this section we offer an introduction to CFD (Contracts for Difference) trading and how it works, featuring examples and reasons to trade CFDs. We also discuss the related pricing and funding requirements.

  • Ways to trade

    As the essential components behind just about every other product imaginable, commodities are as vital as they are volatile. Find out how these invaluable natural resources fit into the wider trading world.