三菱日联：2025年大宗商品展望-审慎选择对冲特朗普引发的尾部风险

Commodities2025outlook

Stayselective,hedgeTrump-inducedtailrisks

December2024

MUFG|EMEACommoditiesNetwork

CommoditiesResearch

EhsanKhoman

HeadofResearch-Commodities,ESGandEmergingMarketsResearch

SoojinKim

Analyst

EMEAStructuredFinanceOffice

StephenJennings

HeadofEnergy

ECA,Commodity&StructuredTradeFinance

AtakanAkkaya

HeadofECA,Commodity&StructuredTradeFinance

François-XavierReignier

HeadofECA&StructuredTradeFinance

SandieHessing

HeadofStructuredTradeFinanceOrigination

FrançoisColombani

HeadofCommodityFinance

RelationshipManagement

MichelePeduzzi

HeadofEnergyCoverage

CorporateAdvisory

CliveGregory

HeadofCorporateAdvisory

TimothyMadden

CorporateAdvisory

2

page

Contents

Executivesummary03-04

Commodities2025outlook

1

2

2025commoditiesthesis05-10

Stayselective,hedgeTrump-inducedtailrisks

3

2025commoditiessubgroupoutlook11-27Perspectivesonenergy,basemetals,preciousmetalsandtheagriculturecomplex

4

Theunderinvestedcommoditiessupercycle28-32

The“5Ds”commoditiessupercyclethisdecade

5

Commoditiesforecasts33-34

Quarterlyandannuallyestimates–asofDecember2024

6

MUFGGlobalMarketsResearchCredentials35-38

page3

Executivesummary|Commodities2025outlook

Hedgetailriskswithvolatilityabound

Stay

selectiveacrossthecomplex

•Werecommendaselectivecommoditiesbiasin2025givendifferentiationinfundamentals:

•Energy(neutral-to-bearish).Foroil,anunresolvedsurplusandhighsparecapacityisbearishbut,two-tailrisksofbreakoutsinourUSD65-80/bcorridoronTrump-induced

tariffsand/orgeopoliticaluncertainty,aretangible.Fornaturalgas,delaystotherampupofUSLNGsupplyprojectshavepushedoutourlowerUS/EUgaspricesto2026.

•Basemetals(neutral-bullish).Sidewaysnear-termontariffriskpremiums(sticks)before

•Preciousmetals(bullish).Gold’sunshakablebullmarketremainsourmostconstructiveconvictionforthesecondconsecutiveyear,reinforcedbyacombinationof“fear”

(geopoliticalhedgeoffirstresort)and“wealth”(EMcentralbankdemand)dimensions.

•Agriculture(neutral).UStrade,foreignpolicy,widergeopoliticaldevelopmentsandan

uncertainLaNiñatoamplifyvolatilitybutalowinventorybasecapsdownsidepricerisks.

bullishreactiveChinesestimulus(carrots)andstructuralgreentransitiondemandarrives.

•ThesweepingpivotsinUStrade,energy,fiscalandimmigrationpoliciesinagoverningtrifectaTrump2.0mandate,areinflationary.Commoditiesactasacriticalinflationhedgeasphysicalassetshistoricallydeliverstrongrealreturnswheninflationrises,whileequityandbondrealreturnstendtobenegative.ThisfortifiesthediversificationplaycommoditiesofferportfolioallocationsacrossthreecentralTrump-inducedinflationshocks–(1)positivedemandshock;

(2)negativesupplyshock;and(3)shocksspurredbycentralbankcredibilityloss/geopolitics.

Toptrades

•Longgold–“fear”and“wealth”dimensionsoffercompellingentryforourlonggoldcall.

•Long/shortoil–upsideonlowvaluations/Iransupplyrisks;downsideonhighsparecapacity.

•Shortgas–upcomingmega-supplywaveofLNGsupplydrivepricesbelowligniteeconomics.

December2024|Source:MUFGResearch

page4

Contents

Executivesummary03-04

Commodities2025outlook

1

2

2025commoditiesthesis05-10

Stayselective,hedgeTrump-inducedtailrisks

3

2025commoditiessubgroupoutlook11-27Perspectivesonenergy,basemetals,preciousmetalsandtheagriculturecomplex

4

Theunderinvestedcommoditiessupercycle28-32

The“5Ds”commoditiessupercyclethisdecade

5

Commoditiesforecasts33-34

Quarterlyandannuallyestimates–asofDecember2024

6

MUFGGlobalMarketsResearchCredentials35-38

page5

Commodities2024performance|tacticalbiashasproventherightstrategy

Commodities(BCOMindex)deliveredanear-flatreturnin2024,withlossesinenergyandagricultureoffsetbygainsin(preciousandbase)metals.Beingtactical,ascataloguedinour2024outlook(see

here

),tocaptureselectivereturnshasproventherightstrategy.

Commoditieshaveunderperformedassetclassesin2024

Cross-assetperformance(rebased100=1January2024)

120

118

116

114

112

110

108

106

104

102

100

98

96

94

01-Jan

15-Jan

29-Jan

12-Feb

26-Feb

11-Mar

25-Mar

08-Apr

22-Apr

06-May

20-May

03-Jun

17-Jun

01-Jul

15-Jul

29-Jul

12-Aug

26-Aug

09-Sep

23-Sep

07-Oct

21-Oct

04-Nov

18-Nov

02-Dec

Equities

USDFX

Debt

Credit

Debt

Commodities

Aconfluenceofhigher-for-longerrates,astrongerUSdollar,tepid

Chinesegrowth,burgeoningoversupplyandRussiansanctions

underestimationhasledtocommoditiesunderperformingin2024.

Heterogenousperformanceacrosssubcomponentsin2024

Commoditysubcomponentsperformance(year-to-date,%)

Coffee

EUNaturalGasGold

USNaturalGasSilver

LeanHogsSoftIndex ZincAluminiumLiveCattleUSDIndex CopperSugar

Globalcommodities PlatinumWTICrudeNickel

BrentCrudeGasolineCorn

Cotton PalladiumEUETSEUA WheatHeatingOil IronOreSoybean

HardCokingCoal

-40-30-20-100102030405060

Beyondcoffee(acutesupplydisruptions)andEUnaturalgas(lowbase),gold–ourmostbullishcall–surgedin2024onFedcuts,robustcentralbankdemandandbullion’sroleasthegeopoliticalhedgeoflastresort.

December2024|Source:Bloomberg,MUFGResearch

page6

Commodities2025outlookandtoptradeideas|stayselective

Commoditiessubcomponent

convictionin2025

Commoditysubcomponent

Returnstoend-2025*

Signal

Neutral-to-bearish

Neutral-to-bullish

BCOMENindex:-1.8%

Energy

Base

metals

BCOMINindex:3.2%

Bullish

BCOMPRindex:17.4%

Preciousmetals

Agriculture

Neutral

ThewiderangeofpivotsinUStrade,energyandfiscalpolicyinagoverning“trifecta”Trump2.0mandatefromatiming,magnitudeandsequencingperspectivestrengthensthediversificationplaycommoditiesofferinportfoliosin2025.

Rationale

Foroil,anunresolvedsurplusandhighsparecapacityisbearishbut,two-tailrisksofbreakoutsinourUSD65-80/bcorridoronTrump-inducedtariffsand/or

geopoliticaluncertainty,aretangible.Fornaturalgas,delaystotheramp-upofUSLNGsupplyprojectshavepushedoutourlowerUS/EUgaspricesto2026.

Sidewaysnear-termonChinatariffriskpremiums(sticks)beforeareactiveboost

toChinesestimulus(carrots)arrive–medium-termbullishonscarcitypricingled

bystructuralgreentransitiondemandwhichsetsthestageforinventorydepletion.

Gold’sunshakablebullmarketremainsourmostconstructiveconvictionforthe

secondconsecutiveyear,reinforcedbyacombinationof“fear”(geopoliticalhedgeoffirstresort)and“wealth”(EMcentralbankdemand)dimensions.

BCOMAGindex:0.6%

UStrade,foreignpolicy,widergeopoliticaldevelopmentsanduncertainLaNiñatoamplifyvolatilitybutalowinventorybasecapsdownsidepricerisks.

Trade

Commoditiestoptrade

ideasin2025

Description

Gold

Longgoldspot

Crudeoil

Naturalgas

Rationale

Demandfromfinancialandmonetaryinstitutions,investorsandspeculatorsonthebackofUSFedcuts,USpolicyuncertaintyandheightenedgeopoliticaltensionsoffercompellingentryforourlonggoldcall.

Brentcrudespreads–longMay/June2025,shortMay–June2026

LowvaluationandIraniansupplyrisksdrivenear-termoilpriceupside,whilehighsparecapacityandriskoftariffsescalationposedownsiderisksto2026prices.

Short2026European(TTF)andUS(HenryHub)naturalgas

WeexpecttheupcomingwaveofglobalLNGsupplytodriveEU/USnaturalgas

pricesbelowligniteeconomicstomanagestorage(notpricedintotoday’sforwards).

December2024|Source:Bloomberg,MUFGResearch;*weanchorourforecastsontheBloombergCommodities(BCOM)indexanditssubcomponentsofenergy(BCOMEN),basemetals(BCOMIN),industrialmetals(BCOMPR)andagriculture(BCOMAG)

page7

Commoditiesroleasaninflationhedge|Trump-inducedtailrisks

Commoditiesactasaninflationhedgeasphysicalassetsdeliverstrongrealreturnswheninflationrises,whileequityandbondrealreturnsarenegative.ThisfortifiesthediversificationplaycommoditiesofferportfoliosacrossthreeTrump-inducedinflationshocks.

TheimpactofthethreecentralinflationshocksunderTrump2.0tendstobepositiveforcommodityreturnsbutnegative-to-mixedforbondsandequities*

Basemetals

Precs.metals

Typeofinflationshock

Inflationrisksunder

Trump2.0

Bonds

Agriculture

Equities

Crudeoil

Positive

demandshock

(↑growth,

↑inflation)

1

Naturalgas

Negative(rates↑)

Positive(cyclical)

Mixed

(rates↑+riskpremium↓)

Positive(cyclical)

Negative(counter-cyclical)

Mixed/positive(mildlycyclical)

Mixed/

positive

(moderately

cyclical)

Negative

supplyshock

(↓growth,

↑inflation)

2

Fiscaleasing

(lowtaxes,

highspending

oninfraand

defence)

Verypositive(bydefinition)

Mixed

(rates↑+riskpremium↑)

Negative

(growth/rate

sensitive)

Negative(rates↑)

Positive

(substitution)

Positive

(stagflation

hedge,

geopolitical

hedge)

Positive

(cost↑,

substitution)

Mixed/

positive(real

assetdemand,

priceinelastic

demand)

Mixed/

positive(price

inelastic

demand)

Mixed

(rates↑↑+riskpremium↑↑)

Verypositive

(safe-haven

asset)

Negative(rates↑)

Mixed

Centralbank

credibility

loss/geopolitics

(↑inflation

expectations)

3

Mixed/

positive(real

assetdemand,

priceinelastic

demand)

Guardsagainst

demand-led

inflationroiling

highreturns

latecycle

Directionally

similar

protectionas

energy

Offerslargestprotection,with

thestrongestrealreturnsacross

assetswheninflationsurprises

totheupside

Guardson

inflationledbycentralbankcredibilityloss/geopolitics

HawkishonIranoilsupply

Fed

subordination,

tariffs,debt

fears

Commodityhedgingrationale

December2024|Source:Bloomberg,MUFGResearch;*commoditiesactasainflationhedgeforbondsandequitiesgivencommoditiesdeliverrealreturnspage8

wheninflationsurprisestotheupsidewhileequityandbondrealreturnstendtobenegative.Thiscommodityoutperformancepartlyreflectsthe

directhedgingbenefitsoflongenergypositionsagainstnegativeenergysupplyshocks(eg.lowerIranoilsupply)whichboostsbothinflationandcommodityreturns

Bloomberg(BCOM)index

FedFundsRate(%)

6.56.05.55.04.54.03.53.02.52.01.51.00.50.0

145

140

135

130

125

120

115

110

105

100

95

90

Today’scommoditiesmilieu|reminiscentof1995’ssoftlanding?

Today’sglobalmarketssetupisnotnewandwesawit1995–theonlycaseofasoftlanding.Weviewcommoditiesareprimedforarepeatsurge,especiallygiventightmicrofundamentalsoflowinventoriesandcorroboratedbybackwardatedcommoditymarkets.

CommoditiesralliedastheFedcutratesin1995–will2025seearepeat?

Bloombergcommodity(BCOM)index(rebasedstart=100)andUSFedFundsrate(%)

FedFundsratebetween

Fedratecutsin1995-96

2022–present

between1995-96Commoditiesindex

FedFundsrate

between1995-96

Commoditiesindex

between2022–present

Jan-22Jan-93

Apr-22Apr-93

Jul-22Jul-93

Oct-22Oct-93

Jan-23Jan-94

Apr-23Apr-94

Jul-23Jul-94

Oct-23Oct-94

Jan-24Jan-95

Apr-24Apr-95

Jul-24Jul-95

Oct-24Oct-95

Jan-25Jan-96

Apr-25Apr-96

Jul-25Jul-96

Oct-25Oct-96

Jan-26Jan-97

Apr-26Apr-97

Jul-26Jul-97

Oct-26Oct-97

Thenatureoftheratecuts–“good”vs“bad”–matters,andtheimpactoncommoditieswilldependonthecyclicalcontext

Commoditiesenjoypositivereturnsduringa“good”cuttingcycle

(growthfirm,declininginflation),and viceversa,suffernegativereturnsduringa“bad”cuttingcycle(growthdecelerating,stickyinflation).

Acuttingcyclebecauserecessionis imminentwillgenerateverydifferentreturnscomparedtoan easingcycleinasoftlandingscenario(MUFG’sview).

Thecurrentbackdropisincreasinglyreminiscentofthe1995cycle–the onlyexampleofa“softlanding”–whentheFedcutonly75bpamida mid-cycleadjustment,withthedecisiontolowerratesnottriggered byanimminentrecessionorrisingunemployment.

December2024|

Source:Bloomberg,MUFGResearch

page9

Commoditiesperformanceduringsoftlandingepisodes|best-in-class

Commoditieshaveoutperformedallmajorassetclassesinthe12monthspost-Fedcutswhenthelandinghasbeen“soft”.Thecurrentdataisincreasinglyreminiscentofthe1995(softlanding)cycle*.Wecontextualisethecross-assetperformanceduringthatperiod.

Commoditiesoutperformallmajorcross-assetduringsoftlandings

Cross-assetperformanceduringtheFedratecuttingperiodof1995-96thatconstitutedtheonlysoftlandingepisodeofthelast5easingcycles

Assetclass

Bloombergticker

-12months

+0.5%

-14.9%

+22.3%

-6.1%

+4.8%

-9months

+1.9%

-8.8%

+16.2%

-8.1%

+6.5%

-6months

-3months

+3months

+0.9%

+1.4%

+4.1%

-0.1%

-1.7%

+0.2%

-1.0%

+1.1%

+7.6%

-0.3%

+6months

+3.0%

+5.8%

-0.9%

-0.2%

+3.8%

+9months

+12months

+20.9%

+66.9%

-19.2%

-4.8%

+22.0%

+18months

+28.9%

+118.8%

-14.9%

-12.5%

+9.7%

+24months

+23.4%

+71.4%

-4.2%

-21.3%

+14.1%

Commodities

BCOM

+0.1%

-2.6%

+17.9%

Energy

BCOMEN

-0.8%

-9.4%

+47.0%

Basemetals

BCOMIN

-4.9%

+0.3%

-7.4%

Preciousmetals

BCOMPR

+2.4%

-4.6%

+1.4%

Agriculture

BCOMAG

+3.4%

+3.3%

+18.8%

Crudeoil

CO1

-5.0%

-4.3%

-1.8%

-11.1%

+2.5%

+21.9%

+21.9%

+48.9%

+11.5%

Naturalgas(US)

NG1

-30.7%

-9.4%

-1.9%

-9.4%

+18.3%

+55.5%

+93.1%

+111.1%

+43.0%

Copper

LCADS03

+18.7%

+16.1%

-1.6%

+0.3%

-1.4%

-14.7%

-34.7%

-25.4%

-18.2%

Aluminium

LAHDS03

+19.7%

+9.8%

-11.9%

-3.4%

-1.7%

-7.9%

-16.6%

-14.0%

-11.0%

Gold

XAU

+0.3%

-2.0%

+3.7%

-2.0%

-1.3%

+2.5%

-0.9%

-6.3%

-15.8%

Equities(Global)

MXWD

+9.7%

+8.8%

+11.0%

+5.5%

MXEF

-1.3%

-15.3%

+1.8%

+9.2%

Equities(EM)

Credit

+5.2%

LGRTRUU

+10.9%

+10.4%

+10.4%

LEGATRUU

+14.5%

+15.9%

+14.0%

+5.4%

Debt

+16.0%

+15.0%

+8.0%

LUACTRUU

+16.1%

Rates

USdollar

DXY

-9.0%

7.5%

-9.2%

-0.1%

+1.9%

+0.3%

+11.3%

+12.1%

+18.4%

+19.6%

+1.7%

-2.0%

+1.1%

+4.4%

-0.4%

+18.7%

-0.8%

+0.3%

+3.6%

+3.1%

+8.4%

+12.5%

+0.5%

-0.8%

+3.3%

+4.2%

+10.2%

+10.2%

-1.7%

+0.3%

+3.6%

+2.1%

+9.2%

+14.4%

+0.9%

+5.2%

+6.6%

+8.3%

+9.8%

+17.6%

December2024|Source:Bloomberg,MUFGResearch;*duringthe1995softlandingepisode,theFedcutonly75bpsamidamid-cycleadjustment,withthepage10decisiontolowerratesnotbeingtriggeredbyarecessionorhigherunemployment.Commoditiessurged29%inthesubsequent12months

Contents

Executivesummary03-04

Commodities2025outlook

1

2

2025commoditiesthesis05-10

Stayselective,hedgeTrump-inducedtailrisks

3

2025commoditiessubgroupoutlook11-27Perspectivesonenergy,basemetals,preciousmetalsandtheagriculturecomplex

4

Theunderinvestedcommoditiessupercycle28-32

The“5Ds”commoditiessupercyclethisdecade

5

Commoditiesforecasts33-34

Quarterlyandannuallyestimates–asofDecember2024

6

MUFGGlobalMarketsResearchCredentials35-38

page11

Energyoutlookin2025|neutral-to-bearish

Trump-inducedenergyrisks

Foroil,anunresolvedsurplusandhighsparecapacityisbearish.Fornaturalgas,delaystotheUSLNGwaveisbullish.DespiteTrump’spro-supplystance,oiloutputgrowthiscappedonshale’s“valueovervolume”stance,whilstgasoutputwillremainpricedependent.

Energythesis

1

•Crudeoil–largeUSproductionunlikely.Whileeasing energycreatesopportunitiesforincreaseddrilling,significantgrowthinproductionisunlikelywithUScrudeoilsupplyprojectedtoriseonly0.4mb/dto13.7mb/din2025 –insufficienttooffsetthedeclineinoilexportsduetoa potential“maximumpressure2.0”campaignonIran.Also, coreOPEC+maybeunwillingtofullycompensateforthelostsanctionedvolumes,givenwarmerdiplomaticrelations.

•Naturalgas(US)–limitedfirst-orderimplications.Despiteexpectedtariffandchangestoenergypolicy,productionwill remainpricedependent.Impactstodomesticdemandgrowthareunlikelytobeseenuntil2027owingtochanging policiesinLNGpermitapprovalsaswellasrescindingcumbersomeemissionsonnaturalgaspowerplants.

•Crudeoil–bearish.Anunresolvedsurplus(0.9mb/don

highersupply*)andhighsparecapacity(~6mb/d)is

bearish.Two-tailrisksofbreakoutsinourUSD65-80/b

corridor(USD73/baverageBrentcallin2025)onTrump-

inducedtariffsand/orgeopoliticaluncertainty,aretangible.

•Naturalgas(EuropeandUS)–neutral.Delaystotheramp-upofUSLNGsupplyprojectshavepushedoutourlower

2

US/EUgaspricesto2026.BoththeUSandEUgasmarketshavehadabullishstarttothewinter2024/25period,withstoragedrawingrapidly,withtheEUparticularlywitnessingrobustdemandandlowerLNGimportsonAsian

AnnualAverages

Unit/USDWeight

CommodityBCOMIndex

BBGTicker

competitionandUSdelaystoitsLNGrampup.

QuarterAverages

39.8%

BCOMENSPIndex

1

2

3

4

5

69.00

78.00

64.00

WTICrude

70.00

CLAComdty

72.39

USD/b

72.83

76.48

79.32

72.00

71.40

72.92

68.25

83.12

77.08

69.00

76.40

74.00

75.00

77.00

75.82

USD/b

77.32

COAComdty

73.25

80.79

83.00

BrentCrude

USD/MMBtu

3.38

2.90

3.79

3.86

4.52

3.49

2.84

3.50

2.90

2.93

NGAComdty

2.70

3.40

USNaturalGas

48.51

37.90

38.00

TZTAComdty

33.00

29.00

33.47

43.00

54.88

39.94

EUR/MWh

38.00

38.58

28.00

EUNaturalGas

6

Q4-23Q1-24Q2-24Q3-24Q4-24Q1-25Q2-25Q3-25Q4-252023202420252026

Energy

68.00

73.00

3.20

52.00

MOAComdty

EUR/MT

EUETSEUA

77.79

61.6769.6568.3667.0073.0075.0079.0082.0089.3466.6777.2585.00

December2024|Source:Bloomberg,MUFGResearch;*non-OPEC+supplyisprojectedtosurgeby1.6mb/d,drivenbylarge-scaleoffshoredevelopmentsinpage12

Brazil,Guyana,SenegalandNorway.Tntotal,fivefloatingproduction,storageandoffloading(FPSO)vessels,withacombinedcapacityof1mb/d,are

committedfordeliveryin2025.USoilliquidsproductionisprojectedtoincrease0.6mb/din2025,withdeepwaterproductionexpectedtosurpassshale.

130

120

110

100

90

80

70

60

50

40

30

20

Brentcrude(USD/b)

Oil–prices|USD65-80/bcorridorwithbearishbias

Brentcrudeprice(USD/b)

75

74

77

73

69

ma+/-2stdevbands

+/-1stdevbands

USD/b(averages)

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q419191919202020202121212122222222232323232424242425252525

MUFG

Consensus

Q1-24Q2-24Q3-24Q4-24Q1-25Q2-25Q3-25Q4-2520242025

CaponBrentpricesatUSD80/b…

OPEC+topivotstrategytomarketdefence*

Returntothelong-runequilibriumfocusonstrategicallydiscipliningnon-OPEC+supply(andfortifyinginternalcohesion)

AmpleOPEC+sparecapacitybuffers

SubstantialOPEC+sparecapacityof~6mb/dofferscomfortthatthiscapacitycouldreturnshouldpricessurge

USshaleisnotdead

Lowshalereinvestmentratessuggestcapitaldiscipline,yetslowerdeclineratesandstrongexecutionbodewellforvolumes

...andflooronBrentpricesatUSD65/b

OPEC+put

Intoday’sunderinvestedenvironment,OPEC+hasinelasticpricingpower**todefendits

fiscalbreakevenlevels~USD80/b

LessUSenergypolicyroom

globalmarkets

Softlanding

SoftlandingbeingourbasecasewithFedcutsboostingdemand-sideconsumption

DepletedSPRssuggesttheUSDoEwillrestockitsbarrelsshouldpricesfall,takingcrudeoff

81857975736974778073

81857978787778798278

December2024|Source:Bloomberg,MUFGResearch;*weexpectOPEC+topivotfromanequilibriumwhereitsupportsspotbalancesandreducesvolatilitypage13toamorelong-runequilibriumfocusedonstrategicallydiscipliningnon-OPECsupplyandsupportinginternalcohesion;**wedefinehighOPEC+pricingpowerastheabilitytoraisepriceswithoutsignificantlyhurtingitsdemand(thisreflectsitselevatedmarketshare)

MUFG

Oil–fundamentals|geopoliticsvsunresolved2025surplus

Stillvalueinlongoilpositionsgivenportfoliohedgingbenefitsagainstlingeringgeopoliticalshocks,yeteasingtensionsispivotingfocusbackontotheloomingoversupplyin2025.Granted,theFedputandChinesestimulusoffersafloor,butitstoughbeinganoilbulltoday.

Geopoliticaltensionsremainhighyetriskpremiumislow

Brentoildecompositiondrivers(rebasedUSD0/b=Jan2024)*

25

20

15

10

5

0

-5

-10

-15

-20

-25

25

20

15

10

5

0

-5

-10

-15

-20

-25

02-Jan

23-Jan

13-Feb

05-Mar

26-Mar

16-Apr

07-May

28-May

18-Jun

09-Jul

30-Jul

20-Aug

10-Sep

01-Oct

22-Oct

12-Nov

03-Dec

DemandSupplyGeopoliticalsupplyrisksBrentoil

Oilfundamentalsarepivotingtooversupplyin2025

Globaloildemand,supplyandoverallbalance(mb/d)

107

106

105

104

103

102

101

100

99

98

97

Globalsupply

Globaldemand

Overallbalance

Forecast

2.0

1.5

1.0

0.5

0.0

-0.5

-1.0

-1.5

-2.0

Jan-22

Apr-22

Jul-22

Oct-22

Jan-23

Apr-23

Jul-23

Oct-23

Jan-24

Apr-24

Jul-24

Oct-24

Jan-25

Apr-25

Jul-25

Oct-25

Jan-26

Overallbalance(D-S,RightAxis)GlobaldemandGlobalsupply

Surplus

Deficit

Despitethesheervelocityofsupplyatrisk,today’sgeopoliticalrisk

premiumremainsnegligible–reasonsistheample~6mb/dofOPEC+

sparecapacitythatcanwithstandsupply-sidetighteningshocks.

Followingadeficitin2023(-0.4mb/d)and2024(-0.4mb/d),themarket

ispivotingtoasurplus(0.9mb/d)in2025,onsurgingsupplygrowth

(2.1mb/d),againststillhealthydemandgrowth(1.2mb/d).

December2024|Source:Bloomberg,MUFGResearch;*strongdemandduetoanexpandingglobaleconomywouldliftbothoilandequityprices,whilstapage14supplyshortagewouldboostoilpriceswhilehurtingequities(higherenergycostsmakecorporateslessprofitable).Ifbothoilandequitiesmoveinthesamedirection(higherorlower)thatindicatesademandshock.Though,iftheymoveinoppositedirections,thatsignalsasupplyshock

Oil–risks|myopicbullsandlong-sightedbears

Oilpricerisksareskewedtothedownsidein2025.Notonlywillsupply(OPEC+andnon-OPEC+)surge,thatwillpivotthemarketfromadeficittosurplus,buttariffsaswellasChina’sroadfuelswitchingtowardsEVsandnaturalgas(LNGtrucks)willhamperdemand.

Gravitationaltilttooilpricerisksistothedownside

EstimatedpeakimpactonBrentpricesin2024-25(USD/b)

RiskstoourUSD65-80/bcorridorskewbothwaysin2025

Brentpricesestimatesbasedonkeysupply/demandrisks(USD/b)

40

30

20

10

0

-10

-20

-30

-40

+USD39/b

+USD26/b

+USD20/b

+USD12/b

+USD10/b

-USD5/b

-USD6/b

ChinaGDP<45%-USD7/b

USimposes~10%tariffs-USD9/b

-USD14/b

-USD29/b

Downsidepricerisks

Upsidepricerisks

StraitofHormuzvesseltraffic

disruptionsfor30days

DisruptionstoMiddleEastoil

suppliesfor30days

Iransupplyfalls~1mb/d(no

OPEC+response)

Iransupplyfalls~1mb/dwith

(OPEC+response)

Fedcutsbelow30-3.5%terminal

ratebyH12025

LighterregulatoryburdenforUS

E&Ps

FedFundsrateremainsat5%(or

higher)

OPEC+reversesallitsoutputcuts

byH12025

Globalhardlandingwithworld

GDP<3%(OPEC+responds)

TimespreadsLong-datedpricesRiskpremium

95

90

85

80

75

70

65

60

55

Near-termbearishforces

fromtariffsand

higherOPEC+supply

Medium-termbullish

forcesfromlowerIranianoilsupply

Oct-24

Dec-24

Feb-25

Apr-25

Jun-25

Aug-25

Oct-25

Dec-25

Feb-26

Apr-26

Jun-26

Aug-26

Oct-26

Dec-26

Baseline

USimposes10%tariffsacross-the-board

Iransupplyfalls1mb/d(noOPEC+response) Iransupplyfalls1mb/d(OPEC+response)

OPEC+reversesallitsoutputcutsbyH12025

Highsupplysparecapacity,potentialtradetensions,China’seconomic

malaiseandthepossibilitythatOPEC+mayreturntothemarkethigher

supplythanweexpectin2025,pointstodownsidepricerisks.

Two-tailrisksofbreakoutsinourUSD65-80/bcorridorexistfromtariffs

aswellashigherOPEC+supply(near-termbearish),againstgeopolitical

uncertaintyonlowerIranianoilsupply(medium-termbullish)

December2024|Source:Bloomberg,MUFGResearch;*ouroilpriceriskimpactassessmentsarebasedon(1)thefairvalueoftimespreadspage15

(spotprices–long-datedprices)basedontheirnegativerelationshipwithinventories;(2)long-datedoilpricesbasedontheirnegativerelationshipwithsparecapacity;and(3)theriskpremium(timespreads–theinventories-basedfairvalueoftimespreads)basedonthehistoricaldistributionofriskpremia

350

325

300

275

250

225

200

175

150

125

100

75

50

25

0

Naturalgas–EUprices|adelayedbearishcycle

EUnaturalgas(EUR/MWh)+/-2stdevbands

+/-1stdevbands

--EUnatgas(TTF)(EUR/MWh)

52

43

o38