Global Commodities: What’s New?

Hello, and welcome to another episode of At Any Rate. I'm Greg Scheer, your host for today, and I head up base and precious metals research at J.P. Morgan.

Let's start with our regular update on the conflict in the Middle East. Markets continue to be headline sensitive while they try to decipher the status of Iran-U.S. negotiations. Although Iran has acknowledged that the gap between the two sides' positions has narrowed, discussions are still underway on the critical issues of enriched uranium and the control over the Strait of Hormuz.

On the oil side, record-setting inventory draws and demand destruction have helped fill in for the supply shortfall. Although the market is expected to tighten as the U.S. opens its annual travel season with the Memorial Day holiday this weekend. As the impact of the Middle East shock unwinds, we are taking note on the structural changes happening across commodities markets.

Today, we're going to discuss our updated views on natural gas and precious metals, as well as some of the new additions we have made to our forecasts. On the gas side, we are joined by Ohtar Degboadze, who leads European natural gas research at J.P. Morgan.

Ohtar, good to see you again, and thanks for joining. Let's maybe start with you, Ohtar, on the gas side. From my perception, gas has been one of the maybe slower commodity markets to really go global, which means that the differentials between different regional pricings has been quite important.

And I think one of the persistent themes and stories that we've been discussing on this podcast has been the price premium of Asian gas to, say, European benchmarks. You've now introduced a forecast for Asian liquefied natural gas. Why do you think it's so important for the market, and where do you see that market going from here?

Hi, Greg, and thank you for having me. So we introduced forecasts for what's called JKM, spot LNG prices. So JKM stands for Japan-Korea marker, and this is a spot price for LNG delivered in Asia.

Purely technically, this is not directly one-to-one comparison to TTF, for example, because this is a LNG delivered in Asian ports, while TTF refers to gas prices in Dutch pipeline system. So between the two, you have regasification cost, regasification capacities, and things like that. However, these two benchmarks are very closely correlated, especially since last few years with the rise of US LNG, which is primarily spot volumes.

So that's another big differentiation between European and Asian markets, that in Asia, for example, about 80-85% of Asian LNG imports are contracted under long-term. For example, China technically last year was more than 100% contracted because their imports, actual volumes were lower than their contractual volumes. Out of this 80-85%, about 20% comes from Qatar and UAE.

And Europe, on the other hand, is only about 45% contracted, and it highly relies on spot volumes. Even this 45% share has quite increased over the last few years since 2022 and loss of Russian supply. In some markets, there are exceptions like Spain, Portugal, and Poland, who have shares closer to 70-80%.

But the key Northwest European markets like France, Italy, UK is about 40-50%. And other markets like Netherlands, Belgium, it's only 10-20% contracted. So that's why spot prices are very important for Europe.

Now, because a lot of contracted volumes in Asia were coming from the Middle East since closure of Hormuz, these countries had to replace these lost contracted volumes with more spot volumes, which was mainly coming from the US. And this is what we see across the shipping data that we look at daily. So for example, we look at daily loadings in the US LNG terminals and then the location of these ships.

And at the moment, only about 50%, less than 50% of the ships are pointing towards Europe. Usually, this share is closer to 100% in winter and about 70-75% in summer. On the other side of this, we also see increased traffic through Cape of Good Hope through African tip, which also indicates this LNG vessels originated from US are heading towards Asia.

And last thing also this week, we saw at least three redirections where the ships were moving towards Europe, but in the middle of the voyage, they changed their direction and they now are on their way to Asia. And this is a reflection of this premium that Asian buyers are paying over European prices. So at the onset of conflict, this spread of JKM versus TTF was as high as $4 per MMBTU, which is historically very high.

At the moment, it's about $2 and we expect this spread to tighten. We expect absolute prices to go higher. We expect TTF to average at around 55% throughout, sorry, 55 euros per megawatt hour in 2Q and 3Q.

And accordingly, the TTF, and less so for JKM. So the spread of $2 today, we think will tighten to about $1.50 per MMBTU, which will translate into higher netbacks for TTF and European market when we adjust for the shipping cost differential between Europe and Asia. And what about getting this back, you were mentioning the U.S.

What are our thoughts on gas prices from that perspective? Is there any knock-on effects that roil back into the U.S. gas market from this? Not really.

So U.S. gas market, sorry, U.S. Henry Hub is actually trading comparable levels to where it was trading when the war started at around $3 per MMBTU. And it largely remains kind of isolated from the global rise in gas prices.

And it continues to be driven by domestic fundamentals, which is domestic supply, production, and obviously weather. And why is that is that U.S. LNG facilities is already running at near full capacity.

It's about 20% of the total U.S. production that is exported as LNG. And that as much as it can be, if we skip summer maintenance, maybe it can go to 21, 22, but there is no direct incentive for U.S. Henry Hub prices to rally just because the LNG export prices have increased.

Gotcha. Thanks, Otar. And I think it's an interesting transition into the metal side and particularly the precious metal side, which we took an opportunity to refresh our forecasts across the curve, is that there is this still immense focus on the energy side, maybe a bit of uncertainty depending on the geopolitics, but from a precious metals standpoint, it's quite a stark differential from where we were throughout much of 2025 and even into the beginning of 2026 is that precious metals are largely sidelined.

We see this through weakness in investor attention. We see it in activity metrics that have cooled quite materially, and we also see it in just pretty stagnant price activity. If we look at gold at the moment, we're really just stuck between this 200-day and 50-day moving average, which sits at something around on the bottom 4,370 and that 50-day moving average at top, that is capping prices closer to around 4,670.

What we largely think is that this precious rally from a structural standpoint is a pause, not a U-turn. When we're thinking about the structural bullish drivers that we've discussed many times throughout the last year of this podcast, debasement, US fiscal risks, geopolitical fracturing, all of those are still there. Probably all of those are also being further fueled by what we're seeing in the last few months.

It's just that precious metals for now are on the back burner. Why is that? That's because there's worries about the tail risk scenarios to energy prices and inflation.

We ultimately think that resolution is really the key to getting gold's continued structural push higher back on track. We're really waiting for that macro clarity that lessens those tail risks, and in particular, hits the market more comfortable about understanding the inflation dynamics and the Fed's reaction function to those inflation dynamics. Where does this leave us on our price forecast is we are still structurally bullish these metals, particularly gold.

We now see a price that still has enough demand to push it towards around $6,000 per ounce by the end of this year, by the fourth quarter of 2026. We really think that our timing and our base case timing on a resolution to this conflict, which is looking for an opening of the Strait of Hormuz next month, is quite essential for this, because our base case on the Fed is a Fed on hold for 2026. Yet when you look at market implied pricing, at the moment, it's pricing in almost something around 80% chance of a 25 basis point hike.

Ultimately, what we think is the first step of this is more macro clarity, less tail risks around inflation. That begins to drive a bit of a relief rally. Then we're coming from a place where actually demand has been on hold here for a few couple of months, and investors have really been largely de-levered.

We start to see a bit of momentum chasing come back through into gold as you see a backup potentially in the US dollar and the Fed pricing on rates. Ultimately, what that then begins to come into is a market that we still think is quite healthy in the physical sense. We're still looking, for instance, for something around 10% growth on a year-over-year basis in retail bar and coin demand, mainly from China, even as Indian demand has gotten a bit colder as they've put up more barriers to imports as a way to protect their external account.

We're also looking at a broader financialization wave of gold that we think still has further to run with ETF flows increasing by about 10% or about 400 tons. The big question mark is on central banks. We've seen, in our view, a bit of a let-up in buying momentum.

Last year came in over 800 tons of central bank purchasing. We do think you're going to come in a bit lighter this year, something around 640 tons, but do still think once that macro clarity really comes about, even if it comes at a bit of a lag for central banks, which may move a bit more conservatively, a bit slower, that there is still dry powder out there to deliver something around 640 tons of central bank demand. When we begin to all sum that up, it is essentially a story that this resolution gets this gold demand outpacing supply story back on track over the second half of 26, pushing prices once again higher towards $6,000 per ounce.

When we translate that into the other metals that we cover on the precious metal side, silver, we still think, has a bit of a valuation issue at the moment, which is that we're moving from very sharp and persistent deficit into what we see as a physical balanced market this year and actually a surplus next year. Ultimately, while we don't think silver decorrelates from gold, we do think that most of its catch-up trade is largely behind it and see prices ending the year closer to around $90 per ounce. The PGMs, just very briefly, what I would say is our focus is primarily on platinum, where we still see a pretty tight physical market this year with supply struggling and think that there can be bouts of continued market stress and tightness driven by fluctuations in Chinese demand, and that largely keeps it on a path that stays trying to catch up with gold.

We still see some pretty significant upside in platinum, seeing prices averaging something around $2,400 by the end of this year. Palladium, in our view, needs to price at a differential that begins to steal increasing amounts of platinum demand. This is where we ultimately see prices going in that differential towards something around $800 to $900 per ounce to begin to incentivize increased amounts of substitution in automotive auto catalysts, and that backfilling some of the loss that palladium demand has suffered from an acceleration in electrification.

Ultimately, see palladium prices staying a little bit more restrained, trading at around $1,600 per ounce by the end of 2026. To summarize, the last week has brought a slate of forecast updates across both gas and precious metals. On the natural gas side, we've introduced JKM price forecast, and really the key point of the note is a declining premium to TTF, which we see narrowing from something around $2 towards around $0.50 over late 2Q and 3Q, which is really leading Europe to re-emerge as the more profitable destination for U.S. spot exports.

On the precious metals side, precious metals are on the back burner for now. Conflict resolution is key. We remain structurally bullish on this gold story as we go through the balance and the back half of this year.

Ottar, thank you so much for joining me. To our listeners, thank you for tuning in to the Commodities Edition at J.P. Morgan's At Any Rate podcast.

We look forward to continuing the conversation next week. This communication is provided for information purposes only. Please refer to J.P.

Morgan Research Reports related to its content for more information, including important disclosures. 2026, J.P. Morgan Chase & Company, all rights reserved. This episode was recorded on May 22nd, 2026.