Commodities - Renewed gain in oil prices drives commodity prices higher in July

Global commodity prices rose in July, according to an estimate by FocusEconomics. The FocusEconomics global price index increased 4.2% from June’s result, regaining lost ground after four previous months of falling prices. The shift in momentum came on the back of surging energy prices, along with strong gains in base metals and agricultural commodities prices, while prices for precious metals fell slightly from June’s result. On an annual basis, commodity prices were up 10.9% from July 2016, above June’s 8.6% increase, as prices continue to gradually recover from a collapse in 2015–2016.

Developments in the oil market have taken center stage in recent weeks and have sparked volatility in prices. OPEC oil output came in at the highest level this year in July, fueling doubts over the effectiveness of a production cutting deal between major oil producers. However, this was counterbalanced by a pledge of deeper cuts by Saudi Arabia and a slowdown in growth of U.S. oil rigs. In addition, market analysts are speculating that OPEC members will better comply with the production cut deal following a meeting at the end of July and another in August; this, combined with robust demand for oil, helped boost prices in July.

Looking at developments across the other commodity markets, poor weather caused grain prices to surge in recent weeks—driving the notable gains seen in agricultural prices. Booming prices for iron ore supported the rise in base metals prices. Robust demand from China as producers benefit from government stimulus led steel production to rise by nearly 5% in H1. Meanwhile, broad-based declines were seen in the precious metals market, as prices are being weighed down by rising interest rates.  

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