Market Speaks: Global Commodity Prices Seen Rising More Than Expected Says World Bank

Commodity prices to rise more than expected in 2018 according to a latest update from the World Bank. Crude Oil prices are forecast to average $ 65 a barrel over 2018, up from an average of $ 53 a barrel in 2017, on strong demand from consumers and restraint by oil producers, while metals prices are expected to rise 9 percent this year, also on a pickup in demand and supply constraints, the World Bank stated.

Prices for energy commodities – which include oil, natural gas, and coal — are forecast to jump 20 percent in 2018, a 16% upward revision from Octobers outlook, the World Bank said in its April Commodity Markets Outlook. The metals index is expected to rise as a 9% drop in iron ore prices is offset by increases in all base metals prices, led by nickel, which is forecast to rise 30%. Agricultural commodities, including food commodities and raw materials, are anticipated to see a price rise of over 2% this year on diminished planting prospects. Weather disruptions are expected to be minimal.

Oil prices are expected to average $ 65/bbl over 2019 as well. Although prices are projected to decline from April 2018 levels, they should be supported by continued production restraint by OPEC and non-OPEC producers and strong demand. Upside risks to the forecast include constraints to U.S. shale oil output, geopolitical risks in several producing countries, and concerns the United States may not waive sanctions against Iran. Downside risks include weaker compliance with the oil producers agreement to restrain output or outright termination of the accord, rising output from Libya and Nigeria, and a quicker-than-expected rise in shale oil output.

Upside risks to the metal’s price forecast include more robust global demand than expected. Supply could be held back by slow incorporation of new capacity, trade sanctions against metals exporters, and policy actions in China. Downside risks include slower-than-expected growth in major emerging markets, the restart of idle capacity, and an easing of pollution-related policies in China. Precious metals are expected to climb 3% this year in anticipation of US interest rate increases and higher inflation expectations.

Grains and oils and meal prices are expected to rise in 2018, mostly due to lower planting intentions. The mild La Niña cycle that extended into the early part of the year only affected banana production in Central America and soybean production in Argentina and did not impact global markets for those crops substantially. The possible introduction by China of countervailing duties in response to US tariff increases could impact the soybean market.