Global Commodities: 2026 Outlook – Supply-driven crocodile cycle
The desk asserts that the divergence in commodity price movements signals a significant shift in market dynamics, with supply-constrained metals outperforming energy commodities. Per the full note from J.P. Morgan, this transition reflects a broader 'crocodile cycle' where supply factors increasingly dictate price trajectories. The outlook for 2026 suggests that metals will continue to thrive due to persistent supply constraints, contrasting with the oversupply in energy markets. This perspective aligns with our consensus, which anticipates a continued bullish trend for metals amid a bearish outlook for energy commodities.
What the desk is arguing
J.P. Morgan projects that commodity prices will enter a new regime by 2026, characterized by supply-driven cycles that are increasingly decoupling from historical trends. This cycle is anticipated to favor metals, as they face supply constraints, while energy markets are burdened with surplus production.
Supporting this thesis, J.P. Morgan cites the distinct behaviors of various commodity markets, wherein energy prices experienced a reset downward in 2024, contrasting sharply with rising prices in the metals sector. This bifurcation underscores the complexities of global demand and supply dynamics, suggesting that investors should recalibrate their strategies accordingly.
The implicit counterfactual in J.P. Morgan's analysis is that the previously synchronized commodity cycles may not return, as persistent supply issues in metals and continued oversupply in energy reshape the landscape. This deviation in price behavior underscores the need for market participants to closely monitor supply chain developments in both sectors.
01Supply constraints in the metals sector will continue to drive prices upward while energy markets face oversupply challenges.
02The traditional correlation between various commodity prices may remain broken, necessitating a reevaluation of investment strategies.
03As we approach 2026, the differentiation in commodity cycles will become more pronounced, favoring metals over energy.
Market implications
This analysis suggests investors should consider reallocating resources towards metals as a protective strategy against potential headwinds in energy markets. Given the expected continuation of the supply-driven dynamics, commodities exposure may need to be rebalanced to capitalize on these emerging trends.
Risks to this view
Key risks to this outlook include unforeseen policy changes that could impact production levels in both sectors, as well as geopolitical developments that may disrupt supply chains. Additionally, a sudden uptick in energy demand could temper the anticipated price increases in metals.
Hello, and welcome to another episode of At Any Rate. I'm your host, Natasha Kanova, and I head JPMorgan Global Commodities Research. Today we would like to discuss our outlook on the commodities sector for 2026, and I'm joined by my colleagues, Greg Shearer, who heads our metals research team, and Otar Dembwadze, who covers global natural gas markets.
Greg, Otar, welcome. So taking a look at the commodities performance, so last year it was pretty much a flat performance, and commodities index this year is up by about 12% year-to-date, as losses in energy and agriculture are offset by gains in metals. So being long metals, both industrial metals and precious metals and short oil has proven the right strategy in 2025, which was the theme of our 2025 Global Commodities Outlook.
The title actually was Bullish on Gold for Third Year, supply-constrained base metals offer better value than oversupplied oil. So if you take a closer look exactly what the returns were this year, the big home precious metals sub-index has surged by 62% year-to-date, base metals are up about 11%. In the case of oil, oil has declined by about 16%, but adjusted for the raw yields, it's down about 9%.
And then in the case of the agricultural lifestyle index, they have been broadly flat year-to-date. So this was the picture for this year, but let's take a look into 2026. So our team is forecasting that the index will exhibit broadly flat returns next year, continuity declines in energy are balanced by further price increases in metals and agriculture.
So let's discuss the sector in order of our preference. So Greg, you are number one. So we maintain our bullish year, our multi-year bullish outlook on gold for a fourth year in a row.
So the first time we put it by recommendation was November 2022, gold was trading at $1,700 at that time. So looking at 2026, maybe you can dip a little bit into 2027. So what is the price target?
What is the rationale behind the call? And your outlook for the rest of the precious metals complex as well, please. Yeah, thank you, Natasha.
As you said, still quite bullish, not to bury the lead. We see prices of gold rising towards $5,000 per ounce by the end of 2026, continuing albeit with a little bit less upside velocity as we go into 2027, expecting something around 5,400 for gold ending 2027. What's behind it is still a market here where supply inelasticity rules.
We are expecting a bit stronger mine supply growth, but it's not doing nothing to offset the continued structural increase that we see in demand. We're expecting, you know, continued robust central bank demand, something around 755 tons. As we look to 2026, while that's off the recent peaks of above 1,000 tons, that is simply just because we are trading at $4,000 and above.
And so you don't need to buy as many tons of gold to get the same movement in desired reserve share of gold. On top of that, we still think there's a litany of supportive factors expanding gold's ownership pool. What do we see beyond this?
Two Fed cuts into early 2026, broader investor anxiety, you know, everything from U.S. debt sustainability, policy uncertainty, you know, financial easing globally. We think all of this continues to drive significant inflows into ETFs. What that really leaves is a market that is still averaging something around nearly 590 tons of investor and central bank demand a quarter as we go into 2026.
What we need and what the data shows back to 2017 is that you basically just need 350 tons for gold to stay flat quarter over quarter. And this is an environment that we still think skews risk towards reaching our upside targets even quicker with sharper inflows from the investor community. Beyond that, still in an environment with gold rallying where silver is supportive, both silver and platinum have jumped very recently.
We still think that, you know, silver supported up here towards $58 Browns and may have gotten a bit ahead of itself now. Both of these are still under scrutiny with Section 232 investigations outstanding. That is limiting liquidity and leaves them in an environment where there's potential bullish upside for both silver and PGMs as we look to early 2026.
Thank you, Greg. OK, so second question is again for you, Greg. Industrial metals remain second among our preferred longs, particularly going into the first half of next year as acute supply disruptions continue to underpin a bullish outlook on copper.
Could you please walk us through your price targets and the logic behind the view? Yeah, thanks, Natasha. Very convicted in our bullish copper view into the first half of 2026.
And that really drives the attitude across the whole complex. What we see in copper here is that supply disruptions, limited supply, constrained supply. You know, we're only expecting something around 1.4 percent mine supply growth next year after flat mine supply growth this year in copper is providing the necessary fuel.
And the foundation of this bullish outlook for the coming quarters is really built on severely dislocated global inventory with the U.S. front loading imports here throughout 2025 and continued that continued pull of refined copper into the U.S., which is really straining ex-U.S. copper balances as we look to the coming couple of quarters. You know, what we've seen is copper entering a higher regime and breaking out over the course of this week. We ultimately see an upside on an average price forecast in the second quarter of 2026 of twelve and a half thousand dollars.
I do think there's upside risks to this. I do think we are entering the end of the beginning of this bullish setup in copper. What we saw this week was cancellation of about 50 KT of copper off of the LME exchange that has dropped on warrant inventories on the LME below 100 KT.
What we see is we are entering the critically low levels and we're expecting, you know, 330 KMT deficit in refined copper in 2026 and expecting that these LME stocks are going to continue to dwindle. And that opens up a very bullish environment where essentially we see both LME spreads or backwardation as well as higher LME prices, you know, attempting to essentially reverse this open arbitrage to the U.S. to to allow and incentivize that flow of almost 600 KMT that has been built in the U.S. here to date to go to other regions where it's where it's more immediately needed. And we really think we're at the precipice of this and are still quite convicted as we look into the first half and over 2026 in copper.
Within that view, outside of copper, we do think aluminum feels that magnetism higher of copper in the first half, pulling up towards around $3,000 per metric tonne, though as we go forward in aluminum, the supply cycle is much quicker than copper and we are seeing Indonesian supply growth beginning to weigh on aluminum fundamentals and prices. But that's still a later in our forecast, a late 2026 into 27 in the very near term, still quite supportive of aluminum fundamentals here. Turning back to you, Natasha, in third place this year, we have the agriculture sector where we're expecting returns next year are largely to be mixed across the complex.
What are the forecasts for the main agri commodities? Thank you, Greg. Unfortunately, Tracy is not able to be with us here today.
She is on maternity leave, but you're absolutely correct. In the third place, we have the agri sector with mixed expected returns. We remain bullish on corn and wheat and see greater upside in ice number two continent, ice number 11 sugar, but we retain a more bearish outlook on soybeans.
Interestingly, currently we see no clear signs of shortages or supply side stress in any of the agricultural commodities except in livestock sector and to some extent cocoa markets over the coming seasons. So Otar, next question is for you. So our view on U.S. natural gas shifted from neutral, which was held in at the end of 2024 in our outlook for 2025 to outright bearish.
So the 2026 price expected to average $3.74 per MBTU. This is bearish relative to the current forward curve as we forecast strong production growth driven in part by the Permian associated gas production. That's the forecast that is coming from the oil side of the balances.
Hi, Natasha. Thank you for having me. Yes.
So our price forecast is below forward curve, which is about $4.4 per MBTU for calendar year 2026 after the recent rally over the last few weeks as December weather is folding out about two standard deviation colder than 10 year normal. So what drives our price forecast is what we think two key variables in the U.S. natural gas market over next couple of years. It's the LNG feed gas demand and the supply mix to meet this demand.
So as you mentioned, considering our oil forecast of about 400 KBD growth in U.S. liquids production and primarily in Permian, which is also coupled with gas infrastructure expansions in the region, we think that the increase in associated gas production that will come with these liquids and increasing the gas takeaway capacities will be sufficient to meet the rising demand in 2026 and will limit the need for gas price driven production and essentially keeping U.S. gas prices in moderation. Usual disclaimer here is that assuming normal weather conditions, of course. We see this starting to change in late 2026, early 2027 as the domestic and LNG export demand warrants a gas price driven production to accelerate.
And we expect prices to increase in Q4, 26, Q1, 27 to about $4 to $4.15 per MBTU. Thank you, Tar. And if we take a look at the European natural gas, though, it's not a part of the Commodities Index.
The European natural gas market is also facing lower prices and structurally reduced storage levels as destination flexible U.S. LNG becomes the marginal source of supply. So can you please walk us through your TTF targets?
Yes. So the rising U.S. LNG exports is an important driver for natural gas prices, not only in the U.S., but globally.
We see about 400 BCM a year of LNG export projects under construction, out of which half is approximately half is in the U.S. And so in total terms, this is about two thirds of current market size, and we think it leads to oversupply in late 2020s. We also think that the rise of readily available and mostly destination flexible U.S.
LNG, as you mentioned, reduces the strategic importance of storages globally and especially in Europe, as U.S. will effectively become a global storage hub, marginal supplier, and essentially a pricing point for global natural gas. So we think the new normal for European storage levels are near 83, 84 percent ahead of winters compared to more than 90 percent historically. And prices to continue trending lower, as we've been observing throughout 2025.
So we expect 2027 prices to materialize about 4 euro per megawatt hour lower than 2026 prices, which is well below current spread of about 1.2, 1.3 euros per megawatt hour. And lastly, quickly on Russian gas, it's hard to forecast the timing, but we still firmly believe that if and when a ceasefire is reached between Russia and Ukraine, this will lead to the resumption of Ukrainian gas transit and partial return of Russian pipeline gas to the continent, which will add to the oversupplied bearish narrative. Thanks, Otar.
So that leaves oil, which for the second year in a row takes our last spot. Natasha, can you walk us through what's driving our continued bearish outlook on crude? Well, thank you, Greg.
Yes, you're absolutely correct. So we maintain a bearish outlook on oil for a second year in a row. So falling sharp decline in 2025.
So we started with $80 and actually last year, oil averaged $80. But this year, the averages will be probably around 67. We project oil prices to fall further, averaging about $10 lower, $58 for Brent in 2026 and slightly lower in 2027.
So our message to the market, Greg, has remained consistent since mid-2023. So while oil demand is pretty good, supply is simply too abundant. So taking a look at the demand, it defied all the widespread bearish sentiment.
Global oil demand is good. But if you take a look at global oil supply, especially our projections for 2026, supply is forecast to outpace demand, expanding at three times the rate of demand in both 2025 and 2026 before moderating slightly in 2027. So as a result of that, we have global oil inventory surging almost 1.5 million barrels per day year to date.
That's what we're tracking. The bulk of this bill, about one million barrels per day, is oil and water and stocks in China. But we do not discriminate against the locations of the stocks and we treat them as a net additions to global supply.
That will carry importantly into 2026 and put downward pressure on Brent prices. However, just looking at the full magnitude of this market imbalances that we're forecasting, we believe that they are unlikely to materialize in practice. They're just too big.
And because of that, we do believe that there will be adjustments that will take place on both the supply side and the demand sides. However, the greatest burden of rebalancing will almost certainly fall on the supply side. So the market will find equilibrium through a combination of rising demand.
When the prices go down, demand goes up. Usually it makes a voluntary and involuntary production cuts. And because of that, we maintain our price forecast of $58 Brent.
This is for the second year in a row we have been sitting on this price forecast that we introduced our 2027 forecast of $57 for the Brent price, acknowledging that considerable effort will be required to stabilize prices at these levels. Just a quick word on the refining margins expected to remain elevated through both 2026 and 2027, supported by the strong demand and ongoing supply constraints, which in our view, a very big part of that is actually structural. Thanks, Natasha.
So what I'm hearing here is a quite an interesting bifurcation. Metals, both precious and industrial, have outperformed energy in both 2024 and 2025. And when we look to next year, we're expecting a similar trend, which is likely to carry over even into 2027.
How do you explain this divergence, Natasha? What are the practical implications of it as well? Yes, Greg, so this is a very interesting dichotomy you're pointing out, because if you take historically, and we have data going back 50 years, commodity prices have experienced repeated and highly synchronized cycles across various markets.
So why is that? So if you take a look at the energy markets and the metals markets, both precious and industrial metals are pretty much moving in very, very synchronized fashion. And the main reason for that is because the performance of those commodities is tied to or has been tied to global economic trends through shifts in demand.
So what is interesting is that this coal movement, as you pointed out, broke down in 2024. At that time, we just mentioned it because we put this in the title of our report. But we did not see the trend yet.
And so the coal movement broke down in 2024. Energy prices reset lower, as you pointed out, while metals prices, particularly gold, silver, PGM, copper and aluminum, surged, marking a very sharp divergence primarily driven by supply dynamics. So we believe that this dichotomy is likely to persist through 2027.
So in essence, what we're saying is that for the last 50 years, the cyclicality and the synchronization of the commodities markets was driven by demand. But since 2024, actually, supply is the main part that the market should be paying attention because this divergence is due to the supply factors. So what we're calling this cycle, it's the crocodile cycle, because you had this synchronized movement.
And now the mouse of the crocodile opened in 2024, and it's gaping now more and more and more going into 2026 and 2027. The practical terms, as you pointed out, that's interesting because, for example, if you take the commodities performance, they have been a significant disinflationary force in 2023 and in 2024. But in 2025, they have actually contributed to higher headline inflation, driven primarily by surging prices in specific foods, metals categories, but also pipe, gas and electricity.
But what is interesting is the commodities added to the inflation this year, despite the fact that oil prices fell by 16 percent. So this concludes our podcast, and to sum it up, we believe that the BECOM index will remain largely stable in 2026 after rising almost 12 percent in 2025. But what we're advising the market is not to pay that much attention on the performance of the commodity index as a whole, but actually to take a closer look at the subcomponents.
So our view for the second year in a row remains that energy markets will continue underperforming, while the metals, both precious metals and industrial metals, will continue to outperform substantially in both 2026 and 2027, opening this gap in the performance of the commodities index, the so-called crocodile cycle. So Greg, Otar, thank you so much for joining me today, and thank you all for listening to the commodities edition of the JPMorgan's At Any Rate podcast. We look forward to continue the conversation next week.
This communication is provided for information purposes only. Please refer to JPMorgan research reports related to its content for more information, including important disclosures. 2025 JPMorgan Chase & Company, all rights reserved. This episode was recorded on December 5th, 2025.