TORONTO, April 12, 2017 /CNW/ - The Scotiabank Commodity Price Index gained 2.2% m/m in February as industrial commodities continue to benefit from healthy demand on the back of a stronger global economic outlook, while supply-side idiosyncrasies continue to provide opportunity for differentiation. The oil market recovery remains on track but fragile, as OPEC headlines will continue to drive near-term market sentiment, especially ahead of the May 25th meeting to decide whether or not to maintain production cuts for another six months.
"We're now in the third month of OPEC production cuts and compliance within the OPEC-11 has been surprisingly strong," said Rory Johnston, Commodity Economist at Scotiabank. "We believe that the combination of high OECD inventories, still-weak upstream investment outside the U.S. and recent oil price weakness will prompt OPEC to extend their production cap through the end of the year."
Prices for North American benchmark WTI have been downgraded and are now forecast to average $53/bbl in 2017 and $56/bbl in 2018. Four key trends that will shape the oil market for the remainder of 2017 are OPEC output discipline; the pace of the U.S. shale response; non-OPEC production declines outside the continental U.S. and; the strength of consistently-underestimated global demand growth.
Non-OPEC countries outside the U.S. and Canada remain a larger but slower-moving factor in future supply. However, recent strength in Brazilian production has offset broader weakness in the rest of this "other" category. This production group will be essential to meet future supply needs and is nearly equal to OPEC in size.
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Read the full Scotiabank Commodity Price Index online at: http://www.gbm.scotiabank.com/scpt/gbm/scotiaeconomics63/SCPI_2017-04-12.pdf
Scotiabank provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.
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SOURCE Scotiabank
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