Commodities have seen an explosive boom in 2021, thanks largely to last year’s Covid-19 market downturns. Commodities have risen by 21% over the first six months of the year despite economic inflation, which makes them the top performing asset group of the markets. With people travelling less and being stuck at home more, the trend has shifted towards spending on physical goods. This is one of the biggest factors influencing commodities, combined with the fact that travel is slowly opening up again and industries are returning to normal, so fuel demands–and therefore petroleum products–are rising again. The Bloomberg Commodity Spot Index tracks the price of various raw materials, and at the end of July it was closing in on the record number it hit in 2011. So, what are the key factors playing a role in this commodities boom, and which commodities are thriving?
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Aside from the uptick in demand from countries increasing their travel and the return to normal industry output levels, mining and oil companies have cut down their spending on new projects, resulting in a supply decrease. Since last year, oil companies have reduced extraction and supply of oil in order to mitigate the impact of Covid-19 on prices, so oil remains at a lower level of supply. This, combined with the recent OPEC+ meeting, which helped settle the dispute between the UAE and Saudi Arabia, has led to an increase in the price of oil, which in turn impacts the demand for petroleum products overall. West Texas Intermediate (WTI) crude oil was one of the top performers for this year so far, increasing by a whopping 52%. Bloomberg reported that on the 2nd of July, US oil consumption had hit a record high, albeit seasonally adjusted, which bodes well for oil in the markets going forward.
Natural resources and metals
One of the most significant comeback stories in the natural resources realm of commodities was Anglo American. The mining company announced $4 billion in dividends, and even though the company’s profits were overshadowed by its rivals, it was still a noteworthy turnaround. Additionally, global leading iron ore miners Rio Tinto Group and Vale SA announced in July that they will give back over $17 billion in dividends.
Steelmakers have finally been able to recover from almost a decade of trouble and are finally able to pay it forward to their shareholders. ArcelorMittal SA, for example, one of the biggest steelmakers in the world, was able to offer a $2.2 billion share buyback program this year, after selling all its shares and ending its dividends program five years ago. Mineral-wise, nickel is making great strides in the market recently, as it hit $20,000 per ton and is on track towards reaching its highest price since 2014. Aluminium prices reached over $2,600 a ton, making this another metal being driven by increasing demand. Copper is yet another winner when it comes to metal commodities in 2021, nearing $10,000 per ton, even in the face of strikes in Chile.
Despite economic inflation worldwide, we’ve seen a serious rally in natural gas prices as demand has returned at an exponential rate. UK natural gas rates are nearing record highs as utilities battle to refill their inventories and Europe struggles with a supply issue. In China, thermal coal futures rose very near a record high, and across Asia, liquified natural gas prices are surging over the summer as importers attempt to compete with their prices. With the world’s shift towards renewable energy, however, many wonder what’s next for fossil fuels like natural gas. It’s a good time to make sure you stay on top of the news to see how the factors that influence commodities are changing. This includes the likes of economic inflation, recessions, and technological innovation, especially in the renewable sphere.
Choose commodities to trade with iFOREX as CFDs
When putting your CFD trading portfolio together, you can choose commodities to trade with iFOREX from a wide variety including petroleum products like WTI oil and natural gas to metals like gold, silver and nickel, to agricultural commodities like wheat, corn and soybeans. When you choose commodities to trade with iFOREX as CFDs, you’re joining one of the leading global brokers that offers excellent trading conditions, an innovative trading platform, and exceptional client support.
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