World Bank expects oil, industrial commodities surging in 2017

Business Wednesday 25/January/2017 14:14 PM
By: Times News Service
World Bank expects oil, industrial commodities surging in 2017

New York: Energy and industrial commodities outlook is looking more bullish as stronger demand and supply constraints are boosting prices from oil to zinc, the World Bank said.
Average prices for fuels such as crude, natural gas and coal will rise 26 per cent this year from 2016, while those for metals including lead and zinc will climb about 11 per cent amid increasing supply tightness, the Washington-based lender said in its quarterly Commodity Markets Outlook released on Tuesday.
The Bloomberg Commodity Index advanced 11 per cent last year after touching the lowest level in two decades in January. Zinc and Brent crude were among the biggest gainers. Iron ore surged more than 80 percent in 2016 as the credit stimulus in China helped to sustain steel output in the top producer.
"Prices for most commodities appear to have bottomed out last year and are on track to climb in 2017,” World Bank’s economist John Baffes said in the report.
Crude oil prices are projected to average $55 a barrel in 2017, a 29 per cent increase from 2016, following the agreement between Opec members and other producing nations to trim bloated global inventories amid rising demand from Asia. The forecast assumes that producers will partially comply with the pledge, the bank says.
Global rebound
The World Bank is not alone in its view. Goldman Sachs Group said on Tuesday commodities will be supported in the next few months by a global rebound spanning the US, Europe and China that’s buttressing worldwide demand for raw materials.
In December, Citigroup predicted that most raw materials are expected to perform strongly in 2017 as global economic growth picks up, the oversupply that’s dogged markets finally dissipates and investors plow in more funds.
The World Bank said agriculture prices are expected to rise 0.6 per cent this year with a projected 3 per cent gain in oils and meal prices and a 2 per cent increase in raw materials such as cotton and rubber. Grain prices are seen dropping 3 per cent amid favourable conditions for crops including wheat and corn.
The World Bank said fertilizers are expected to rise by 2 per cent this year on firmer demand, while the market remains well supplied as capacity continues to expand. Iron ore prices are seen pressured down after last year’s race "ahead of fundamentals" as new low-cost capacity is expected to ramp-up this year, notably Vale’s new S11D project in Brazil, the World Bank said.
Precious metals seen falling 7 per cent as benchmark interest rates rise and safe-haven buying ebbs.