Most commodity prices on the rise amid increasing demand, risk appetite

The past month has seen a rally in many parts of the commodities complex, owing to the signing of the first phase of a trade deal between China and the US boosting equity markets and risk appetites, states analytics and forecasting organisation Oxford Economics.

In its latest commodity price forecast, it says precious metals led the way higher, while iron-ore and the base metals prices have also rallied.

“Iron-ore and gold prices are currently up 6% month-on-month, while copper is up 2% and aluminium 1% month-on-month.

“However, oil prices were very volatile owing to fears about a US and Iran military conflict, down 1% month-on-month,” says the global forecaster.

Oxford Economics further reports that Brent oil prices moved above $70/bl in early January, as a US drone strike killed an Iranian general in Iraq and Iran responded with its own missile attacks on US bases.

However, the impact on prices was fleeting.

“We still expect the global oil market to be oversupplied in the second half of the year and next year, which will limit the scope for higher prices even during periods of heightened political risk,” Oxford Economics says.

The Organization of the Petroleum Exporting Countries group is still acting together to underpin oil prices, but spare capacity is building as Saudi Arabia deepens its cuts. The group will meet again in March to agree the next stage in its rebalancing plan, while an extension to the current cuts will be needed to avoid the market moving back into oversupply.

Base metal markets have been boosted by increased risk appetite, but fundamental drivers remain important in differentiating trends across the commodities complex. For example, aluminium prices have edged higher despite improved Chinese manufacturing data and car sales.

“With the country set to boost production significantly this year, aluminium’s reluctance to follow other markets higher is understandable.

“Zinc, on the other hand, rose by a more substantial 4% month-on-month, reflecting decent demand from the construction and steel sectors.

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