TORONTO, Oct. 17, 2017 /CNW/ - The Scotiabank Commodity
Price Index eked out a small gain of 0.7% m/m in September, with
industrial commodity strength (+1.9%) outweighing losses in the
agriculture index (-4.0%). Energy markets are experiencing gradual,
range-bound recoveries against volatile metals performance. While
metals rallied together in the third quarter, prices are diverging
again as individual fundamentals reassert control.
"These market-specific developments are occurring against a
widely supportive backdrop, where an accelerating global economy is
bolstering commodities demand and broad U.S. dollar weakness is
putting upward pressure on dollar-denominated contracts," said
Rory Johnston, Commodity Economist
at Scotiabank. "We anticipate that most industrial commodities will
continue to gain in year-over-year terms through the forecast
horizon, though bulk commodities are expected to undergo a needed
correction and precious metals prices are forecast to fall back on
a higher rate environment."
The oil market is rebalancing much as expected but prices have
lagged the gradual recovery occurring in the physical market, with
still-high commercial inventories providing ample cover for bearish
sentiment and tilting speculative price movements to the downside.
Sentiment headwinds will slow the recovery in crude prices, which
are expected to average $50/bbl in
2017, $52/bbl in 2018, and
$56/bbl in 2019. However, continued
strengthening in fundamentals will tilt medium-term risk to the
upside and ultimately drive prices higher through end-decade, with
supply deficits expected to reduce the overhang in OECD commercial
inventories back to five-year average levels by mid-2019.
Base metals markets experienced a collective third quarter
rally, though prices have since diverged and metal-specific
fundamentals are expected to drive individual performance through
the forecast horizon. In the world of precious metals, the price of
gold remains elevated after briefly breaching $1,350/oz, its highest level of the year, on
falling market expectations of interest rate hikes in the U.S., a
weakening U.S. dollar, and heightened geopolitical risk concerns
related to mounting rhetorical volleys between Washington and Pyongyang.
Other highlights:
- North American natural gas markets are nearer their anticipated
long-term balancing level than oil, but prices will be weighed down
through 2018 by the delay of expected natural gas power plant
start-ups.
- Copper prices are expected to average $2.85/lb in 2018 and $3.00/lb in 2019.
- A gradual reduction of nickel inventories is forecast to put
soft upward pressure on prices, which are expected to average
$4.65/lb in 2017, $5.00/lb in 2018, and $5.50/lb in 2019.
- Zinc continues to enjoy the strongest fundamentals within the
base metals complex and supply tightness is expected to push prices
higher than today's already-inflated levels, averaging $1.50/lb in 2018 and peaking at $1.60/lb in 2019.
- Bulk commodities like iron ore and coking coal have continued
to surprise on the upside after receiving a demand jolt from newly
profitable Chinese steel mills.
Read the full Scotiabank Commodity Price Index online at:
http://www.gbm.scotiabank.com/scpt/gbm/scotiaeconomics63/SCPI_2017-10-17.pdf
Scotiabank provides clients with in-depth research into the
factors shaping the outlook for Canada and the global economy, including
macroeconomic developments, currency and capital market trends,
commodity and industry performance, as well as monetary, fiscal and
public policy issues.
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SOURCE Scotiabank