Commodity Forecast Change: Energy Supply Risks and a Wavering Fed Set the Path

What You Need to Know:

• Energy supply risks keep the oil outlook bullish.
• Precious metals remain supported by uncertainty around interest rates.
• Further oil price spikes could revive inflation and rate-hike expectations.
• Copper strength may fade as supply recovers and trade flows normalize.
• Aluminum prices are also expected to retreat as production returns.

The Macro Research Insight

Persistent oil market tightness amid Strait of Hormuz tensions continue to underpin our bullish energy outlook, while precious metals remain supported by a lack of conviction in the Fed. On the flip side, copper and aluminum face downside risks as supply recovers and tariff-driven distortions unwind.

Oil Stays Elevated and Metals Remain in Flux

TD Commodity Strategy do not expect the oil market to return to normal until December at the earliest and remains at the upper end of the consensus range with our price forecasts. We continue to expect Brent to trade US$5-10/bbl above the current US$90/bbl level over the next three months, with a strong possibility that the world will once again see triple-digit prices. We also expect upside risk for petroleum products to continue due to alarmingly low inventory levels and firm demand.

Our analysis reveals an annual global crude oil deficit of 1.6-2.0 million b/d in 2026 as at least 5-6 million b/d of production capacity remains offline. A potential problem is also brewing in the refined products side if conditions do not normalize soon.

Fed Uncertainty Supports Precious Metals

Gold, silver and platinum group metals (PGMs) have benefited significantly from the narrative that the Fed will not raise rates this year due to political worries, a willingness to look through an energy price shock and a lackluster labor market. However, we see limited additional upside from current levels for now. With oil supply still at risk due to ongoing hostilities in the Persian Gulf, energy prices could still rise enough to alter front-end rate expectations this year. This stands in sharp contrast to the prevailing narrative that, if the U.S. central bank does not raise rates this year, a stabilizing energy market will make further tightening unnecessary next year as well.

The bar for another rate hike remains low should oil prices spike again and inflation concerns re-emerge. Such a development would likely force gold traders to reprice policy expectations to reflect higher Fed funds rates this year and next. The risk of higher rates over this period should keep gold trading in a US$4,200-4,500/oz range into early 2027. Central banks stepped in as buyers when gold fell below US$4,000/oz and may be waiting for more attractive entry points. Beyond that, we project gold to trend toward US$5,350/oz in the second half of 2027, supported by easing inflation risks, a weaker U.S. dollar, and lower carry costs. We expect a similar dynamic in silver and the PGMs, which are likely to respond more aggressively than gold to these monetary and macroeconomic tailwinds.

Copper and Aluminum Strength Faces Supply Rebalancing

Our copper price projections remain constructive as money managers continue to double down on the red metal. With little clarity around Section 232 tariffs, a supportive arbitrage continues to draw copper into the U.S., reshuffling inventories across regions rather than reflecting an outright global shortage of metal. Supply disruption headlines — including the Democratic Republic of the Congo's (DRC) immediate ban on concentrate exports — have added another layer of concern, helping to drive prices higher and offset weakening industrial demand.

Looking ahead, we expect softer demand and a normalization of tariff-driven trade flows to erode some of the tightness currently embedded in copper prices. As a result, improving market fundamentals should pull copper down from the US$14,000+/t levels currently reflected in the market. The return of mine capacity in Indonesia and Panama through 2027, combined with projected global surpluses over the next two years, should ease supply pressures. Tariffs should also moderate incentives to continue aggressively building U.S. inventories once they are implemented. Aluminum prices are likewise expected to retreat from recent highs, as production disrupted by the Middle East conflict returns to the market.