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  April 26th, 2017 | Written by

World Bank: Higher Prices for Energy and Metals in International Trade

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  • Prices for most industrial commodities strengthened in the first quarter of 2017.
  • Crude oil prices are forecast to rise to an average of $55 per barrel in 2017 from $43 in 2016.
  • Oil price wildcard: How fast the US shale oil industry rebounds.

The World Bank is forecasting higher prices for industrial commodities, principally energy and metals, in 2017 and next year.

The World Bank in its April Commodity Markets Outlook is holding steady its crude oil price forecast for this year at $55 per barrel, increasing to an average of $60 per barrel in 2018. Rising oil prices, supported by production cutbacks by Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC states, will allow markets to gradually rebalance, the report said. These oil price forecasts are subject to downside risks should the rebound in the US shale oil industry be greater than expected.

Prices for energy commodities, which also include natural gas and coal, are projected to jump 26 percent this year and eight percent in 2018. In line with oil price forecasts, natural gas is anticipated to gain 15 percent this year, led by a jump in US prices. Coal is seen climbing six percent in 2017, due to earlier supply restrictions in China, which consumes half the world’s coal output.

In other projections, the World Bank expects agricultural prices to remain stable  in  2017, but there is considerable variation across commodities.  Grain prices are projected to decline three percent  this  year while oils and meals are projected to increase three percent  amid  tight  supplies  in  East  Asian  and  South America.

Beverage prices are forecast to decline  six  percent  in  2017 due to large cocoa supplies from West Africa. Raw materials prices are projected to gain four percent because  of  a  supply  shortfall  in  natural  rubber.

Metals   prices  are  forecast  to  increase  16  percent  in  2017  (after  dropping  nearly  7  percent  in  2016)  on  strong demand and tightening markets for most metals. The largest gains are expected in zinc (32 percent) and lead (18 percent) due to mine closures and discretionary shut-ins in several countries. Copper prices are expected to increase by  18  percent  as  a  result  of  various  disruptions  at  some of the world’s largest mines—strikes in Chile, export  policies  in Indonesia,  and  bad  weather  in Peru.

Precious  metals prices  are  projected  to  decline  by  one  percent  in  2017  and a further one percent in 2018 as benchmark interest rates rise and safe-haven buying ebbs.