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Commodity Markets Outlook - April 2014

John Baffes's picture
 
 
The key commodity price indices were broadly stable during 2014Q1. Energy prices changed little, only 0.4 higher than 2013Q4; agricultural prices increased 1.8 percent on weather-related concerns and metal rices declined 3.2 percent on Chinese demand weakness.
Despite geopolitical concerns due to the Russia-Ukraine conflict, oil prices were stable during 2014Q1—they averaged $103.7/bbl, $1/bbl below last quarter’s average. The precious metal index changed little (up 1.1 percent from 2013Q4) while fertilizer prices gained 5 percent on the back of strengthening natural gas prices. A sharp increase in the beverage price index (14 percent higher than 2013Q4) was driven by a rally in coffee (Arabica) prices due to dry weather in Brazil—world’s largest coffee supplier. A weather-induced increase in maize and wheat prices in late February and March 2014 was partly offset by declines in rice prices. The recent adverse weather conditions in South America have been linked to El Nino, which appears increasingly likely this year, according to the U.S. National Oceanic and Atmospheric Administration and Australia’s Bureau of Meteorology. 
In the baseline scenario, which assumes no macroeconomic shocks or supply disruptions, oil prices are expected to average $103/bbl in 2014, just 1 percent lower than the 2013 average (table 1). This forecast is unchanged from the January 2013 Commodity Market Outlook edition. Natural gas prices in the U.S. are expected to remain elevated during 2014 and strengthen even more in the longer term in response to stronger demand from energy intensive industries that are moving to the U.S. EU natural gas and Japanese LNG prices are expected to moderate due to weaker demand—both prices are tied to the price of crude oil. Coal prices are expected to weaken marginally in 2014 but will gain strength in 2015 and onwards as more coal will be used for electricity generation due to substitution away from nuclear power.
Access here the full report, recent prices, infographics, and forecast table.
 

 

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