Market Analysis

Commodity Markets Relax After Storms

| Editor: Janina Seit

During September 2017, world commodity prices rose by 5.2 %. Due to a further slight appreciation of the euro against the dollar, the increase in domestic currency amounted to only 4.2 %. Political and natural storms were responsible for this. The experts at Industriebank IKB analyze the individual raw material prices in the article and the graphics in the picture gallery.

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Commodity markets relax after storms.
( Source: Pixabay / CC0 )

World commodity price index and exchange rate in October 2017.
World commodity price index and exchange rate in October 2017.
( Source: s. chart )

Higher raw material prices were mainly driven by the upheavals in oil markets as a result of the hurricane season in the Caribbean and the Gulf of Mexico. The temporary shutdown of processing capacities by over 3 mbd (million barrels per day) in the USA led to a significant widening of the price gap between the American reference grade WTI and the European benchmark price Brent to over six dollars per barrel (bbl). During the first half of 2017, this price gap had largely been around 2 dollars per bbl.

In addition, as the demand estimated for crude oil has been revised upwards for the fourth time this year, the slightly lower Opec production also spurred an increase in prices. The global oil market is currently on the way to achieving a good balance between supply and demand. This will likely cause the price of crude oil to fall somewhat again.

As a further risk to world commodity prices, the saber-rattling between North Korea and the USA remains the primary risk. By contrast, the economic environment is generally positive, which suggests stable demand for raw materials, especially for metallic raw materials.

In principle, IKB does not expect any sustained appreciation of the euro against the dollar. With the Fed likely to raise its key interest rate in December, the dollar will probably strengthen slightly against the euro.

In this picture gallery you can get detailed information:

This article was first published by Process.

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