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Commodity Markets

OPEC Monthly Oil Market Report – October 2017

9

Commodity Markets

In September, energy commodity prices generally increased, led by higher crude oil prices. Natural gas

prices in the US and Europe increased due to favourable weather patterns. Base metals continued to be

supported by strong prospects for global manufacturing activity, but some signs of deceleration in the

economy of China and rising copper inventories caused a dip in prices. Gold prices rose in the first half of

the month due to increased geopolitical uncertainty but declined towards the end of the month on a

relatively hawkish tone by the US Federal Reserve (Fed) at its September meeting.

Trends in selected commodity markets

Average

energy prices

in September increased by around 5.4% and have been around 26.2% in the

January-to-September period compared with the previous year. In September, the

Henry Hub natural gas

index

was up by 9ȼ, or 2.7%, to $2.96/mmbtu, after trading at an average of $2.88/mmbtu the previous

month. The

US Energy Information Administration

said utilities added 42 bcf of

working gas to

underground storage

during the week ending 29 September 2017. This was below the median 47 bcf

injection expected by analysts. Total working gas in underground storage stood at 3,508 bcf, 4.4% lower

than at the same time the previous year, and 0.2% lower than the previous five-year average. During the

month, the US Climate Prediction Centre (CPC) issued a La Nina watch with a 55%-60% chance of

occurrence in the Northern Hemisphere during fall-winter 2017/2018. This phenomenon is normally

associated with colder winter conditions in some regions of the country, and if it materializes, it would be

supportive of natural gas demand. Natural gas prices in Europe advanced with average prices increasing by

4.4% to $5.51/mmbtu. Natural gas inventories for EU Member States increased to 84.6% full at the end of

September from 76.7% the previous month, though last year’s end-of-September inventories were at 90.3%,

according to data from

Gas Infrastructure Europe

. Australian

thermal coal prices

advanced on average by

1.0% to $96.9/Mt, though they declined in the second half of the month following readings of industrial

production and fixed asset investments in China in August that were below market expectations. However,

raw coal output in China decelerated in August to 4.1% higher y-o-y versus 8.5% higher y-o-y in July, and

further output cuts due to environmental regulation could provide support in the winter months.

Table 2 - 1: Commodity price data

During the month,

average base metal prices

increased by 2.4%, partly due to baseline effects from the

previous month. Metal prices are on average around 25% higher year-to-date, compared to the same period

last year, and continue to show the best performance among the commodity groups since the beginning of

the year. However, the metals rally that started in June stalled for some group components.

% Change

Jul 17 Aug 17 Sep 17 Sep 17/Aug 17

2016

2017

Energy*

62.3

65.0

68.5

3.5

52.1

65.7

Coal, Australia

US$/mt

87.5

95.9

96.9

1.0

56.8

85.0

Crude oil, average US$/b

47.7

49.9

53.0

3.0

40.7

50.8

Natural gas, US

US$/mbtu

3.0

2.9

3.0

0.1

2.3

3.0

Natural gas, Europe US$/mbtu

5.2

5.3

5.5

0.2

4.4

5.5

Non-energy*

83.3

84.3

85.6

1.3

79.5

84.2

Agriculture*

88.0

86.5

87.7

1.4

88.9

88.7

Food*

92.6

89.5

91.2

1.9

92.1

92.4

Base metal*

82.1

88.4

90.5

2.4

66.2

82.4

Precious metals*

95.6

99.4 101.8

2.4

98.1

97.6

Note: * World Bank commodity price indices (2010 = 100).

Source: World Bank, Commodity price data.

Unit

Commodity

Monthly averages

Year-to-date