Commodity prices continue to rally in January on strong global growth and weak U.S. dollar

Last year’s bullish momentum in most commodity markets appears to have extended into 2018, led by a weak U.S. dollar, hopes that global growth will remain buoyant this year and constraints in some upstream sectors in China. Commodity prices rose an aggregated 4.8% month-on-month in January (December: -0.2% month-on-month), the fastest expansion in five months. The energy sector was the main driver of January’s result due to a tight global oil market, followed by precious and base metals. While they increased, agriculture prices recorded only a small gain in the month.

Despite January’s surge in commodity prices, fears about a potential price correction in some key commodities started to emerge in early February. Stock markets declined sharply in the first week of the month, sparking concerns about the actual strength of the U.S. economy. Moreover, high oil inventories in the United States suggest that shale producers are pumping oil at record levels, threatening to flood global oil markets and send prices down.

In this month’s survey, analysts polled by Met the why particular expect commodity prices to rise 1.6% in Q4 2018 from the same period in 2017, which would mark a sharp deceleration over the astounding 15.4% year-on-year expansion registered in Q4 2017.

Further down the road, analysts predict that base and precious metals, as well as agriculture products, will take the lead among commodities in terms of price increases. The Consensus view among commodities experts is that commodity prices will increase 3.1% in annual terms in Q4 2019.


Written by: Ricard Torné, Head of Economic Research

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