Commodities Update February 2026
Commodities entered 2026 with strong momentum, with Westpac’s broad index up almost 11% since December and gains widespread across metals and energy, led by gold. We have upgraded our end‑2026 outlook materially, lifting forecasts for gold, copper, nickel and oil, leaving our broad commodities index around 16% higher than in our December publication. Looking ahead, gold remains the standout, base metals are well‑supported but range‑bound, iron ore faces renewed downside, and energy markets remain firm near term but capped by rising supply and softer global growth.
The following is based on text from the February 2026 Market Outlook (PDF 3MB)
For more details of our longer-term forecasts see February 2026 Commodites Forecasts
Commodities finished 2025 on a firm footing and momentum looks to have carried into early 2026. Since our previous publication on December 12, Westpac’s broad commodities index has risen by almost 11%. While gold has dominated the headlines – up 19% since December and 73% over the past year – gains have been quite broad‑based across the complex. Hard coking coal has risen 21% (34%yr), nickel is up 19% (13%yr), copper gained 12% (39%yr), and Brent crude is 12% higher (albeit off –5%yr). Iron ore is the only commodity we track that has recorded a meaningful decline over the period, falling by around 3% (–4%yr).
In response to this broad-based strength and an improving outlook, we have upgraded our end 2026 profiles for a number of commodities. Gold has been lifted to US$5,600/oz (from US$4,400/oz), copper to US$13,500/t (from US$11,500/t), nickel to US$18,100/t (from US$14,700/t), and Brent crude to US$62/bbl (from US$58/bbl). Overall, our broad commodities index forecast for end 2026 is now around 16% higher than in our December publication.
Gold to continue hitting record highs in 2026
Our bullish year‑end gold price forecast of US$5,600/oz reflects a compelling macroeconomic case for sustained strength. Over the past fifty or so years, gold bear markets have coincided with stronger economic growth, falling inflation expectations, a strengthening USD, and declining risk premia.
Demand is currently being underpinned by a combination of structural and cyclical factors. Central bank purchases remain a key pillar of support, with buying expected to continue given elevated geopolitical risks and ongoing concerns around reserve diversification. Investor interest has broadened across both institutional and retail channels, with inflows proving resilient even as some long‑term holders take profits. Physical demand has also been stronger than expected, including seasonal support from China ahead of the Lunar New Year.
More broadly, gold benefits from shifts in asset allocation away from US‑centric exposures. Given the relative size of global capital markets compared to the gold market even modest reallocations can have a significant impact on price. While official sector buying is likely to gradually slow over time, there are upside risks should geopolitical tensions remain elevated or escalate further. Combined with expectations of weaker growth, persistent inflation risks, a softer USD and continued de‑dollarisation dynamics, these should be sufficient to sustain strong gold prices.
Geopolitics buoy crude but supply forms a cap
Crude prices remain range‑bound, with geopolitical risk continuing to provide intermittent support but diplomacy and improving supply limiting the upside. More recently, Brent was buoyed by reports of the US preparing a second aircraft carrier for deployment to the Middle East while American‑flagged vessels have been urged to transit close to Oman’s territorial waters when navigating the Strait of Hormuz. This has been offset by signs of engagement, including reports that Tehran is open to nuclear site verification despite its refusal to halt uranium enrichment.
On the supply side, OPEC+ reported January crude production fell to around 643kbpd below target, driven by sharp declines in Russian and Kazakh production. Russian output is reported to have slipped further to around 9.28mbpd, nearly 300kbpd below its OPEC+ target, while Ukraine continues to target Russian refining infrastructure. These disruptions have been partly offset by a sharp rebound in US crude production and a steady recovery in Venezuelan output with the EIA forecasting a return to pre‑sanctions levels by mid year.
So far, US inventory data has been mixed, with crude and gasoline stocks rising while distillate inventories have declined. China’s strategic petroleum reserve build is expected to continue before easing in 2027 and while this is a near‑term support it also adds to medium‑term uncertainty. Overall, geopolitical risk remains a key support but rising non‑OPEC supply, particularly from North America, and mixed demand signals keep crude anchored to recent ranges.
LNG outlook is dominated by strong growth in global supply
The massive investment into US LNG is expected to boost global supply faster than demand growth putting downward pressure on seaborne LNG prices. At the same time, growth in LNG exports and the rapid expansions for energy hungry data centres in the US will boost local gas demand by almost 40% in the next 10 years, and this could see US Henry Hub prices rising to around US$5/mmbtu, some 50% higher than the average price in 2025. In effect, the success of US LNG supply growth will come at a cost to US consumers, and alternative LNG exporters, but to the significant benefit of LNG importers.
However, this is not all bad news for LNG exporters. It is true that lower LNG prices are likely to put downwards pressure on the profits of LNG sellers, but the massive growth in supply over the coming years will reinforce the industry’s messages around the competitiveness, reliability and flexibility of LNG. Lower prices will also slow the pace of demand decline in Europe and accelerate growth in demand from Asia, encouraging consumers to commit to gas in their long-term plans.
Iron ore faces weak seasonal demand, supply risks
Iron ore prices were weighed down by elevated Chinese port inventories, steel mill maintenance and cautious procurement ahead of the Lunar New Year holiday. Iron ore prices eased to just above US$100/t, briefly testing the lows seen last August then as we were updating this report prices drop to US$98/t as we headed into the Chinese holiday period. Fresh seasonal highs in port inventories reinforced demand concerns with activity slowing into the holiday period and as you can see in the chart below inventories rising and getting to testing levels compared to measure of demand: compared to pig iron production inventories are the highest since January 2022 and compared to steel production, they are the highest since June 2026
Supply‑side risks briefly emerged following Tropical Cyclone Mitchell, which forced bulk carriers out to sea from major Pilbara ports. However, the system tracked southwest allowing ports to reopen and the Bureau of Meteorology to cancel its weather advisory with no reports of material damage, resulting in only a temporary impact on prices.
The medium-term outlook remains challenging. Rising supply and moderating demand point to a more surplus-prone market. However, fundamentals have held up better than expected, with prices above US$100/t through 2025. We expect prices to dip below $100/t in the first quarter as demand continues to soften combined with incremental growth in supply.
Further out, the market will move into surplus as supply lifts and demand eases. Chinese steel production peaked in 2020 and has been trending down since. Scrap displacement should also increase, partly offset by growth in demand from India and South‑East Asia. With additional supply from Simandou and major producers outweighing depletion among marginal producers, prices should fall below US$85/t through 2027.
Seaborne coal sees near‑term upside as met tightness and energy demand support prices
Seaborne coal markets remain firm, with met coal supported by supply disruptions, Qld weather risks and tight availability of premium coking coal, pushing prices above US$250/t. This strength is unlikely to persist into the second half as supply ramps up. Thermal coal prices remain near the cost curve, but upside risks stem from constrained Chinese supply, winter demand and potential cuts to Indonesia’s 2026 production quota, alongside strong global power demand growth driven partly by the rapid development AI data processing centres.
Following record highs in 2022 driven by gas shortages, trade dislocations and supply disruptions, Newcastle prices fell sharply through 2023–24 and by 2025 had reverted toward cost‑support levels. Over the medium term, seaborne thermal coal demand is likely to contract around 2% p.a. from 2025 to 2030 As Japan, Korea and Taiwan continue to reduce coal consumption doe to current decarbonisation policies. This creates a structural headwind for Australian coal exports, albeit one that is gradual rather than abrupt. High calorific value coal demand is expected to be more resilient than lower‑quality coal, providing relative support to Newcastle coal.
Australia is the second‑largest exporter of seaborne thermal coal (about 19% of the market) and the dominant supplier of high calorific coal into the Pacific basin. However, Australian exports are structurally constrained. Mine depletion, rising strip ratios, regulatory hurdles and community opposition have materially limited industry expansion as major miners have exited the industry or are running assets to end‑of‑life, reinforcing supply discipline. Just as important for Newcastle coal pricing is that that new global investment in coal supply is increasingly difficult to conduct, with financing and permitting challenges constraining future capacity. As such, the seaborne market to remain tight to mildly deficit through 2025 to 2027, before moving into balance or surplus from 2028 as demand softens. As such we expect longer term prices to face downward pressure even though near‑term pricing is supported by constrained supply, particularly if Indonesian export controls or weather disruptions re‑emerge.
Base metals have a solid base
Recent price action across base metals suggests downside risks are increasingly limited, even as near‑term momentum fades.
Robert Rennie has highlighted that global copper inventories are now rising sharply, signalling a shift away from US‑centric hoarding toward softening global demand, particularly in China. Shanghai Futures Exchange copper inventories are up 160kt so far this year, while LME stocks have risen by 60kt, compared with a 90kt increase on COMEX. The inventory build is no longer dominated by US stockpiling but instead reflects waning end‑demand at current price levels.
As a result, copper appears to be entering a consolidation phase, rather than the start of a renewed upswing. With much of the “good news” already priced in, we see copper trading in a near‑term range of US$12,500–13,500/t, with very low risk of a sustained move to the upper end of that range until later this year, or even early 2027.
By contrast, the case for aluminium outperformance within the base metals complex has received further support. South32’s confirmation that the 580ktpa Mozal aluminium smelter will be placed into care and maintenance from March, following the expiry of its power contract, removes a meaningful volume from the market. While Mozal represents just ~0.8% of global aluminium production, it accounts for closer to 1.5–2% of seaborne trade.
That said, upside in aluminium prices is likely to be capped in the near term. Reports that the Trump administration may seek to narrow its broad steel and aluminium tariffs, even if officially denied and downplayed by Treasury Secretary Bessent, underscore the ongoing risk of policy volatility. Against this backdrop, it is difficult to see aluminium prices sustaining levels much above US$3,200/t in the near term, with a clearer path through this level likely deferred until the second half of the year.
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