Commodity prices soften in Q2 2017 beaten back by falling oil prices, but year-on-year index up

Global commodity prices receded in the second quarter, although they still managed to remain above last year’s levels with overall index berthing at 11.5 percent, higher than the corresponding period of 2016.

FocusEconomics, a Spain-based leading provider of economic analysis and forecast, indeed said its commodity price index slid 3.1 percent from Q1’s result, chiefly driven down by lower energy prices.

Oil prices plummeted in the quarter, coming as low as below $50 mark, as the global supply glut shows no sign of easing despite a deal by major oil-exporting nations to cut production.

High U.S. shale production and rising output from Nigeria and Libya—who are exempt from the production cut agreement—have kept oil prices under pressure.

The downward spiral of oil prices has continued into the third quarter with many analysts forecasting that situation will remain so until the fourth where prices would move up marginally as demand for heating would spike. They however foreclosed prices returning to the $60 mark.

Also see: Nigeria national oil company says daily gas supply to power plants rises by 64%

Apart from lower energy prices, base metals and agricultural commodities in the quarter also edged down. Equally, concerns over China have caused extreme volatility in the price of iron ore, which plummeted in the
second quarter.

For FocusEconomics, improved sentiment and increased demand from Chinese steel mills did allow prices to regain some ground as at end June, which slightly ended the quarter on a bright note.

Meanwhile, high levels of global uncertainty are supporting precious metals prices despite downward pressure from a tightening cycle by the U.S Federal Reserve.

To this end, global commodities prices are expected to lingering above last year’s levels and would probably continue in the third quarter.