NEW YORK (AP) -- Citi Research analysts have predicted that emerging global economic patterns will require commodity investors to evaluate each sector individually as they hunt for ways to make profits.
Although demand is expected to increase as global growth improves, commodity prices are not likely to move sharply higher, Citi Research analysts wrote in a forecast released Monday.
"As demand rebounds, commodity performance is likely to become more differentiated, with winners and losers depending on the supply/demand balances for individual commodities," they wrote.
As an example, they noted the U.S. natural gas market. An energy boom has built up ample inventories of the fuel, which early this year contributed to a price drop to a level not seen in a decade. Prices since have rebounded.
"What first occurred in U.S. natural gas — a marshaling of capital and a new supply surplus — is being replicated across most commodities, including critical industrial and bulk commodities and in longer-lead time products such as oil, even with risks to supply disruptions," wrote Citi analysts led by Edward Morse.
For the past several years, commodity prices have benefited from emerging economies in China and other countries that have boosted demand for raw materials such as oil, copper and agricultural products.
But China's appetite for commodities is now growing at a slower pace, and it is developing an economy that relies less on basic materials, the Citi note stated.
In addition, seasonality is playing more of a role, "impacting fuel and food and through them inflation rates across the world," the analysts said. "This increase reflects changing precipitation and temperature as well as changing inventory patterns."
The Citi analysts believe the changing patterns will create ways to invest across different asset classes, "combining commodities with foreign exchange as well as other asset markets, including equities."