Commodities Markets

Strong fundamentals continue driving prices up in January, but some warning signs have started to emerge

The global oil market is rapidly rebalancing, and analysts consider that the global oil glut has finally disappeared. However, the latest data suggests that U.S. shale oil producers are quickly ramping up production, threatening to jeopardize the efforts of the oil-cap deal participants. Moreover, U.S. stock markets slumped in early February amid concerns about rising interest rates in the country and a firmer U.S. dollar, negatively reverberating across most energy price markets.

Prices expand at fastest pace in over a year in January

A combination of a weak U.S. dollar, strong global growth and supply disruptions led precious metals to rise 5.4% on a monthly basis in January (December: -1.1% mom), marking the strongest increase since July 2016. The gain was broad-based, as prices for all four commodities rose compared to the previous month

Signs of strong global economic growth for 2018 boosts prices at the start of the year

Prices for base metals rebounded in January to a 5.1% month-on-month expansion (December: -0.4% mom) as economic indicators for China, the main consumer of base metals, signaled that the economy is still growing at a healthy pace. Economic growth remains buoyant in other key economies such as the Euro area and the United States, while dynamics in emerging-market countries are also improving.

Tighter markets send prices higher in January

Despite ample supply due to no major weather disruptions last year, agriculture prices are gradually recovering following years of abundant production that put a cap on prices. Strong demand for agriculture products is driving the recovery as biofuel consumption remains strong, and there is a general increase in demand for food supplies and animal feed