Commodities Outlook 2025: A Conversation on What’s Changing and Why

"So, tell me, why are oil prices rising again?"

Raj, a supply chain manager, leaned back in his chair, sipping his coffee. Across the table sat Priya, an economist specializing in commodity markets.

"Well, it’s not just one thing, Raj," Priya said, adjusting her glasses. "Think about it like this—oil prices are determined by a mix of supply, demand, and external shocks. Right now, we have a perfect storm brewing."

Oil: The Big Swinging Factor

"Okay, break it down for me," Raj prompted.

"First, supply," Priya began. "OPEC+ has extended its production cuts into late 2025. Saudi Arabia and Russia are deliberately keeping output low to stabilize prices above $90 per barrel. That restricts global supply."

"Makes sense," Raj nodded. "But demand should have fallen, right? With economies slowing down?"

"That’s where things get interesting," Priya said. "Yes, growth in Europe and China has slowed, but the U.S. economy has remained resilient, and emerging markets—especially in Southeast Asia—are consuming more oil than expected. Plus, global jet fuel demand is rebounding as post-pandemic travel normalizes fully."

"Ah, so even if China’s slowing, the demand is being offset elsewhere?"

"Exactly. But there’s another twist—geopolitics. Sanctions on Russia, instability in the Middle East, and tensions in the South China Sea have all contributed to price spikes. Traders fear disruptions, so they price in risk."

"So supply cuts, steady demand, and geopolitical uncertainty are all pushing oil prices up. Got it."

Natural Gas: The Weather-Driven Wildcard

"What about natural gas? I heard prices dropped earlier this year."

"They did, but now they’re climbing again," Priya said. "Early 2025 saw mild winters in Europe, leading to weaker demand and high storage levels. But as we move into the colder months, demand is rebounding."

"And supply?"

"The U.S. and Qatar ramped up LNG (liquefied natural gas) production, making gas cheaper globally. But here’s the twist—China and India have started securing long-term LNG contracts to ensure energy security. This locks in demand, keeping prices from falling further."

"So, prices went down when there was excess supply, but now rising demand is pushing them back up?"

"Precisely. Plus, European countries are shifting away from Russian gas, increasing reliance on LNG imports. This means any disruption—whether it’s hurricanes affecting U.S. exports or geopolitical issues in Qatar—could spike prices."

Lithium: The EV Battleground

"And lithium? Prices have been all over the place!" Raj exclaimed.

"That’s because the market is adjusting to a new reality," Priya explained. "In 2023 and 2024, lithium prices crashed due to oversupply and weaker-than-expected EV sales, especially in China. But now, in late 2025, the trend is reversing."

"Why?"

"Three key reasons:

First, the EV market is stabilizing, with strong government incentives in the U.S. and Europe.

Second, battery technology improvements mean demand for high-quality lithium is growing again.

Third, supply constraints—especially in South America and Australia—are limiting production growth."

"So the lithium oversupply is disappearing, and demand is picking up again?"

"Exactly. And let’s not forget energy storage. As more renewable energy projects come online, lithium-based battery storage is becoming crucial. That adds another layer of demand."

The Bigger Picture: What This Means for You

"So what’s the takeaway?" Raj asked, finishing his coffee.

"It’s simple," Priya said, summarizing:

• Oil prices are high due to supply cuts, steady demand, and geopolitical uncertainty. Expect expensive fuel and transportation costs.
• Natural gas prices are rebounding as demand returns, particularly in Asia and Europe. This means potential increases in heating and electricity bills.
• Lithium prices are recovering as EV and battery demand grows again. The cost of electric vehicles and battery storage solutions could rise in response.

"In other words, whether you drive a car, heat your home, or use a smartphone—these commodity shifts will impact your daily life."

"Got it," Raj said. "Looks like we’re in for a ride."