Commodities remain wedged between bearish macro and bullish micro: The MUFG Global Markets Podcast

Notwithstanding China’s early reopening and a brighter global outlook than at the beginning of the year, US and European inflation have remained stickier than expected, raising expectations of further rate hikes and supressing broad commodity returns in recent weeks.

However, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), believes that the bullish micro fundamental story is still very much intact, with inventory levels at depressed levels and spare production capacity running thin. He believes that with global demand still improving, most commodity markets will likely remain in backwardation, exposing physical tightness and structural underinvestment. This will provide an organic lift in prices as soon as the bearish macro moves into the rear-view mirror.

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