Commodity markets could face consequences of investment deficit in 2023

According to a Goldman Sachs analyst review, in 2023 commodity markets may face the consequences of lack of investment. It was noted that even a significant increase in prices at the beginning of the year did not lead to an increase in commodity projects’ investment. The main obstacle to that was a sharp increase in central bank rates, which caused a rise in borrowing costs.

Occurred reduction of reserves also increases the risks of significant price fluctuations in raw materials. However, analysts believe the impact of this factor will be less significant next year due to slower growth of rates.

The current decline in commodity prices, including oil, is caused by concerns about the state of the world economy next year. Goldman Sachs experts, however, expect growth of business activity in China amid easing of coronavirus restrictions. The bank analysts also believe that the U.S. Federal Reserve System will reduce the pace of policy tightening. In addition, due to the recovery of demand in China, there is likely to be a new rally in the oil market.