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Industrial commodities prices to surge in 2017

John Baffes's picture
Prices for industrial commodities such as energy and metals appear to have bottomed out last year and are forecast to post strong gains in 2017.

Tightening supply and strengthening demand are behind this rebound in prices, which had been in steady decline since 2011, according to the January 2017 Commodity Markets Outlook.

Energy prices – led by crude oil – are seen rising 26 percent this year from last year. Oil is anticipated to average $55 a barrel in 2017, a 29 percent increase from the year just ended. The energy price assumes that members of the Organization of the Petroleum Exporting Countries and other oil producers will partially comply with an agreement to limit production after a long period of unrestrained output.

Metals prices are seen registering an 11 percent rise this year, an upward revision from the 4 percent increase forecast in the previous outlook, which was released in October. What would be the first price increase in six years is due to supply tightness, particularly for lead and zinc. Strong demand from China and advanced economies is also playing a role in driving prices higher.

Precious metals are among the few commodities forecast to fall in price this year. Rising benchmark interest rates and diminished appetite for safe-haven buying are seen pushing prices down.

Agriculture prices as a whole are expected to rise by less than 1 percent – also the first price rise in six years. Small price increases are anticipated for oils and oil seeds and raw materials. However, grains prices are forecast to drop almost 6 percent on an improved supply outlook.

The outlook can be downloaded here and detailed prices forecast for 46 commodities up to 2030 here. Earlier reports and forecast can be found here.