MOMR June 2016

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Commodity Markets
OPEC Monthly Oil Market Report – June 2016 13
harvest delays, while shipments from main export ports also slowed, which propelled a
11% advance in sugar prices. The opposite situation, a drought in Thailand, supported
a jump in rice prices. Meanwhile, wheat prices declined as the US the Department of
Agriculture forecasts larger ending stocks in the next marketing year.
Metals prices generally declined after having advanced over the previous three
months on a stronger dollar and slowing manufacturing momentum in China, seen in
May manufacturing PMI readings of 49.2 versus 49.4 the previous month. Measures
undertaken by commodity exchanges to limit risk-taking in Chinese commodity futures
trading also weighed on prices, especially those of iron ore and steel, which had rallied
since the begining of the year. However, housing prices continued to recover, with
prices for new homes rising in 65 of the 70 largest cities in the month of April, according
to the National Bureau of Statistics. This could lend support to iron ore and steel prices.
Moreover, world steel output decreased by 0.5% y-o-y in April, but increased in China
by 0.5%. Zinc broke the trend and rose during the month on the expectation of supply
cuts and an improving housing market in China.
Energy prices advanced on top of a further recovery in oil prices due to supply
outages in Canada and Nigeria and improving gasoline demand. Meanwhile, natural
gas prices showed a mixed picture. In the US, prices were supported by fewer
additions to storage compared to previous years. However, inventories were still high at
the end of the withdrawal season, which weighed on prices. In Europe, prices declined
on adequate inventories and the lagging effect of oil-indexed contracts. Data from Gas
Infrastructure Europe showed that EU-28 inventories were 18% higher than a year ago
at the end of May. The climate prediction centre of the US currently sees a 75%
chance of development of La Niña – which tends to bring the opposite weather impacts
of El Niño – during the fall and winter 2016/2017, thereby potentially supporting natural
gas consumption.
Graph 2.1: Major commodity price indices
Average energy prices in April increased by 10.8% m-o-m due to a 12.7% increase in
crude oil prices. Natural gas prices increased in the US by 0.9% m-o-m, while average
prices in Europe declined by 2.2%.
Agricultural prices advanced by 3.2% due to increases in average food, beverage
and raw material prices by 4.7%, 1.3% and 0.6%, respectively. Soybeans, soy meal
and sugar led the increase in food prices, advancing by 8.1%, 22.4, 8.9% and 11.7%,
respectively.
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140
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May 14Jun 14Jul 14Aug 14Sep 14Oct 14Nov 14Dec 14Jan 15Feb 15Mar 15Apr 15May 15Jun 15Jul 15Aug 15Sep 15Oct 15Nov 15Dec 15Jan 16Feb 16Mar 16Apr 16May 16
Index Index
Energy Non-energy Agriculture Food
Base metals HH natural gas Gold
Source: World Bank, Commodity price data.
Base year 2010 = 100