Citi's research report indicates that the commodities market is at a turning point. Crude oil is expected to reach a short-term target of $70 per barrel driven by geopolitical factors, but faces long-term pressure from oversupply. Precious metals are bullish, with silver targeting $100 per ounce and gold $5,000 per ounce. Among industrial metals, aluminum presents the most opportunity due to supply shortages, with a target range of $3,400-$3,500 per metric ton. Copper prices are projected to reach $14,000 per metric ton, but January may mark the peak for the entire year.
Amid the confluence of geopolitical tensions and supply shortages, the commodities market is at a pivotal turning point.
On January 14, the Citi Research team published a report providing an outlook for commodities in 2026.
Citi pointed out that the crude oil market is driven by short-term geopolitical premiums, with an upward price target set at $70 per barrel. However, it faces dual bearish pressures from long-term oversupply and policy constraints.
Precious metals are entering a period of heightened prominence, $XAG/USD (XAGUSD.FX)$ with expected performance surpassing that of $XAU/USD (XAUUSD.CFD)$ , with target prices set at $100 and $5,000 respectively.
Aluminum is considered the commodity with the most structural opportunities and is on the verge of its most severe supply shortage in two decades. While copper prices may reach $14,000 by mid-year, Citi warns that January could mark the peak price for the year.
(Summary of adjustments to Citi's base metal price forecasts)
Geopolitical premium supports short-term crude oil rally
The current trend in the crude oil market largely depends on the evolution of geopolitical risks.
Citi believes that recent escalations in Iran and Russia-Ukraine tensions, coupled with export disruptions in Kazakhstan and Libya, are driving Brent crude toward the $70-per-barrel price level.
(Citi's Brent crude oil price forecast)
This is seen as a tactical rebound opportunity, providing producers with a window to hedge against future downside risks.
However, this upward momentum lacks long-term sustainability. Citi expects geopolitical risks to ease in the second half of 2026, while global markets will remain in a state of fundamental oversupply.
More importantly, the Trump administration's pursuit of low oil prices and the approaching U.S. midterm elections in November 2026 will both place significant policy pressure on oil prices.
The frenzy in the precious metals market may make silver the biggest winner.
In the precious metals sector, Citi also adopts a tactically bullish stance.
The report forecasts that silver will continue to outperform gold, with a near-term target of $100 per ounce, while gold is expected to reach $5,000. This prediction is based on current market momentum and capital flows.
However, similar to the logic in crude oil markets, Citi believes that these extreme high price levels themselves will become a trigger point for producers and central banks to hedge against downside risks.
The report suggests that when prices reach these target levels, rational participants should consider taking protective measures.
The narrative driving the rise in precious metals is linked to broader 'hard asset' allocations and concerns about currency devaluation, but the sustainability of this trend carries inherent risks.
The diverging fates of industrial metals aluminum and copper
Industrial metals present two starkly contrasting narratives.
Citi has listed aluminum as its top pick for a structural bullish outlook, citing that the metal is experiencing its largest supply deficit in two decades.
Supply constraints caused by rising global electricity costs have made the aluminum bull market highly resilient, with a short-term target of $3,400 per ton and a medium-term outlook at $3,500 per ton.
In sharp contrast is the outlook for copper. While Citi remains tactically bullish on copper, targeting $14,000 per ton, it explicitly noted that its confidence has "significantly weakened" compared to December last year.
Investors' net long positions are already at historically high levels, and this rally, driven by financial inflows and macro sentiment, is heavily reliant on the continuous injection of liquidity.
(For most base metals, investors’ net long positions are at relatively high levels.)
Citi believes that unless there is an unexpected macroeconomic catalyst, the current price rally has already priced in most of the potential upside, and January is likely to mark the peak for prices this year.
Citi's baseline forecast is that copper prices will eventually retreat to a more sustainable level of around $13,000 per ton, as this price theoretically balances the global market by 2026.
However, Citi raised the probability of a bull scenario (including copper reaching $15,000 per ton and aluminum hitting $4,000 per ton) to 30% from its usual level to reflect a higher likelihood of further gains.
A temporary reprieve for lithium battery materials amid long-term caution
The lithium market has recently experienced a rebound of over 50%, primarily due to $CATL (03750.HK)$ delays in the restart of mining operations and short-term shortages triggered by tightening policies.
Citi raised its three-month target price for lithium carbonate to $25,000 per ton, mainly reflecting the advance stockpiling demand from downstream battery companies and the current tight inventory situation.
(Citi's forecast for the lithium-ion battery market)
Despite the strong short-term data, Citi remains cautious about the long-term trend of lithium prices.
The bank believes that the current price level is already sufficient to stimulate potential supply restarts. Incremental production from mines in Africa and other regions will gradually be released over the next six months. Once the seasonal peak in demand during the first quarter passes, lithium prices will face downward pressure as they return to fundamentals.
Bullish vs Bearish Stance on Natural Gas and Agricultural Products
Against the backdrop of energy transition, the natural gas market is facing challenges of long-term oversupply.
Citi holds a bearish position on LNG and European TTF natural gas, expecting that from 2027 onwards, the global market will enter an obvious phase of oversupply.
With new capacity additions from the Haynesville and Permian Basin regions in the United States, Henry Hub prices are expected to retreat to around $3.6 by 2027.
European TTF natural gas will face a similar situation. Although there will be short-term tightness in supply and demand during the winter, in the long run, the market must induce more demand conversion by lowering prices to absorb the upcoming wave of supply surplus.
(Left: Forecast for European TTF natural gas prices; Right: US LNG export capacity expected to increase by 2.2 billion cubic feet per day by 2026)
In the agricultural commodities sector, Citi holds a bullish view on most products.
Coffee prices face adjustment pressure due to inventory overhang and changes in tariff policies, but sugar prices have approached their bottom after a year of sharp declines.
With the strengthening of China's import demand and Brazil's sugarcane production shifting toward fuel ethanol, sugar prices are expected to rebound by 2026.
(Brazil's monthly sugar exports have started to extend last year’s growth trend)
Overall, Citi's report serves as a sobering reminder for the currently booming commodities market. It advises clients to manage risks amid short-term sentiment- and event-driven rallies while focusing long-term bets on products like aluminum, which face solid structural deficits.
Editor/Doris
