Global commodity prices are getting hammered as a trade war between the U.S. and China escalates the risks of a global recession.
The S&P GSCI index, which tracks global commodities across the energy, metals and agriculture sectors, has declined nearly 10% since April 2 when U.S. President Donald Trump announced a slew of new import tariffs. Commodity prices briefly recovered on April 9 after the White House walked back many of its tariff measures.
However, the rebound in commodity prices was short-lived as President Trump turned up the pressure on China by raising the tariff rate on Chinese imported goods to 145%. China is the world’s largest consumer of commodities, including oil and natural gas, and the higher-than-expected tariffs are likely to be a drag on growth in China and the entire world.
Prices Slide Lower
Prices for energy and industrial metals, in particular, are getting hit hard by the ongoing tit-for-tat tariff dispute between the U.S. and China. For its part, China has raised its import duties on U.S. goods to 84%.
Of all the commodities, energy has fallen the most since April 2, declining 12%, according to S&P Global. Industrial metals have posted the second steepest loss at 9%, followed by soft commodities, which fell roughly 5.2%. The slide lower in prices is hurting the stocks of companies such as oil major Chevron (CVX), mining giant Freeport-McMoRan (FCX), and agriculture behemoth Archer-Daniels-Midland (ADM).
Oil prices are particularly sensitive to trade escalations as China is the largest importer of crude oil in the world. Expectations of further declines in commodity prices are growing as it looks increasingly likely that the global economy might be headed for a recession.
West Texas Intermediate (WTI) crude oil, the U.S. standard, is currently trading at $59 per barrel, having fallen 4% between April 9 and 10.
Is CVX Stock a Buy?
The stock of Chevron has a consensus Strong Buy rating among 14 Wall Street analysts. That rating is based on 11 Buy and three Hold recommendations assigned in the past three months. The average CVX price target of $176.00 implies 27.87% upside from current levels.
