Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
As 2018 approaches, we take a look back at developments in the commodities markets over the past year and asked our economists what the future may hold for various key economies (Oil, Natural Gas, Coal, Lead and Tin). We sat down with some of our economists to get their insight into the following questions:
- What were the key trends in the market in 2017?
- Were there any surprises that affected the commodity that the market wasn’t expecting?
- What was the biggest news in the industry this year?
- What key trends do you predict for the market in 2018?
- Are there any concerns about the market for next year?
- What factors should investors be aware of?
Ricard Torné, Head of Economic Research
What were the key trends in the oil market in 2017?
Oil prices were broadly stable at the start of the year as markets adopted a wait-and-see approach to assess the impact the oil production cut deal between Russia and key OPEC players would have on prices. In addition, the global economic recovery seemed uncertain after Donald Trump was elected and the election cycle had just begun in Europe, where Eurosceptic parties were poised to record solid gains. There was also significant uncertainty regarding the health of the Chinese economy at that time.
These fears became exacerbated in Q2. Investors were concerned about the extent to which participants would comply with the oil production cut deal, and were also closely watching as output rose in Nigeria and Libya—the two OPEC members exempt from the agreement—-and production rose in Canada and the United States.
Various factors helped to turn the tide in Q3. The oil cap agreement led by Russia and Saudi Arabia proved more successful than expected with participating countries sticking to their quotas, thereby limiting global supply.
From the demand side, concerns about rising protectionist policies started to fade, while growth in developed economies and China was surprisingly robust, boosting demand for the black gold. Recent speculation about the oil cut deal being extended well into 2018 prior to the decision and mounting geopolitical risks in the Middle East have contributed to supporting crude prices. Oil prices have soared since October on strong fundamentals, hitting levels last seen over two-and-a-half years ago.
Were there any surprises that affected oil that the market wasn’t expecting?
The markets had not factored in the true strength of the global economy enough, nor did they anticipate that Russia and the OPEC countries would comply with the production cut agreement reached in November 2016.
What was the biggest news in the oil industry this year?
The biggest news in the industry this year was the effectiveness of the oil deal in reducing global supply, a reduction in political risks, particularly in Europe and the United States, and resilient global growth.
Crude Oil Outlook 2018
What key trends do you predict for the oil market in 2018? Are there any concerns about the market or factors that investors should be aware of?
The global economic recovery, rising geopolitical tensions and the OPEC-led oil deal will lead developments in the oil market.
Although the global economic outlook for 2018 appears to be healthy, there are some risks that could derail the ongoing positive trend. A tighter monetary policy in the United States, the possibility of a sharp slowdown in China and many important elections around the world (including in Brazil, Italy and Mexico) all threaten to slow the global economic recovery and therefore impact demand for oil.
From the supply side, geopolitical risks are the key events to watch. Growing political tension between Iran and Saudi Arabia could erupt in severe supply disruptions. Large fiscal imbalances among some key crude suppliers could lead them to deviate from the deal, adding more crude into the markets and pushing down prices. Moreover, along with the possibility of higher oil production by OPEC and Russia, Canada and the United States will likely ramp up production next year, which will be more evident towards the end of the year.
Ricard Torné, Head of Economic Research
What were the key trends in the tin market in 2017?
Tin prices were shut out of the base metals price rally and were broadly stable throughout 2017, although we saw a slight downward trend. While prices stabilized, they prices remained at historically high levels. Developments in the tin market were dominated by China, the world’s largest producer and consumer of tin, and low stocks of tin in LME.
Were there any surprises that affected tin that the market wasn’t expecting?
The unexpected removal of a 10% export duty in China at the start of the year led most developments in the tin market this year as Chinese companies started to flood the international markets.
What was the biggest news in the tin industry this year?
China’s decision to scrap the 10% export duty on refined tin products in January added expected downward pressure on prices. Resilient demand from the electronics sector, however, supported tin prices to some extent. One factor that shored up tin prices in the second half of the year was China’ decision to enforce a stricter environmental regulation.
Tin Outlook 2018
What key trends do you predict for the tin market in 2018? Are there any concerns about the market or factors that investors should be aware of?
China will continue to dominate the headlines in the tin market. Stricter environmental regulation could reduce tin output. Moreover, the tin market will remain in a supply deficit. Despite the shortfall, prices will increase marginally as tin has been suffering from a chronic deficit, which has already been pencilled in by the market. Moreover, stocks in Shanghai warehouses remain relatively high and Indonesia, tin’s largest exporter, continues to boost global supply.
Edward Gardner, Economist
What were the key trends in the coal market in 2017?
Coal prices were on a decreasing trend at the start of 2017 following China lifting production restrictions at the end of 2016. The restrictions had been put in place earlier in the year to support prices and aid a recovery in the mining industry. Prices continued to trend downwards well into Q2 2017 on the back of increased supply. Coal prices started to recover in June, however, due to supply disruptions in Australia and lower output elsewhere. Moreover, stricter environmental rules in China exerted upward pressure on prices. In more recent months, prices have been seen stabilizing below the USD-100 mark.
Were analysts’ predictions for coal in 2017 correct?
Many industry-watchers expected the coal industry to fare worse than it did in 2017, based on expectations of higher production cutbacks from the Chinese side and a faster shift towards alternative and increasingly-affordable energy sources.
Were there any surprises that affected coal that the market wasn’t expecting?
The election of Donald Trump in late 2016 came as welcome news to the coal industry as his administration has been supportive of policies designed to revive its flagging fortunes. Between 2002 and 2016, nearly 60 gigawatts of coal-fired power went offline in the U.S.—enough to supply nearly 60 million homes annually—largely due to increasingly cheap natural gas being used as an alternative. However, an increased focus on the environment in China, coupled with robust demand, were the main drivers behind the price uptick in H2 2017.
What was the biggest news in the coal industry this year?
The biggest news in the industry this year is the ongoing shift away from coal towards more environmentally-friendly fuels, particularly in advanced countries. For instance, in the United Kingdom, coal represented about 40% of the energy mix in 2012, yet that had dropped to just 2% in the first six months of 2017.
Coal Outlook 2018
What key trends do you predict for the coal market in 2018?
Next year, industry-watchers will be monitoring production levels in China closely since the country accounts for the largest demand and supply of coal globally, leading the market on prices. The key issue, however, will be whether Chinese authorities keep enforcing tougher environmental rules or even strengthen them in order to fight pollution.
Are there any concerns about the coal market for next year?
The coal market is seen benefiting from developing countries’ demand for electricity while, at the same time, many advanced countries are weening themselves off coal. The U.S. is bucking that trend, however, as President Trump is championing the coal industry. If developing countries slow their usage of coal-generated electricity next year and opt for more environmentally-friendly alternatives, possibly influenced by diplomatic initiatives such as the recently-launched Powering Past Coal Alliance, this could put downward pressure on coal prices and become a concern for the market going forward.
What factors should investors be aware of?
Industry investors should keep an eye on the corporate landscape, with key mining companies such as the Rio Tinto Group reportedly looking to exit the industry completely, and many large investors themselves, such as Norway’s sovereign wealth fund, already limiting their exposure to the industry for environmental and ethical reasons.
Jan Lammersen, Economist
What were the key trends in the lead market in 2017?
The key trend in the lead market this year has been a mismatch in supply and demand: the latter has generally outpaced the former throughout the year.
On the supply side, the ongoing environmental crackdown in China, which is aimed at solving its pervasive pollution problem, led to disrupted supply chains and decreased output of Chinese lead. As a result, the country has become a net importer of lead instead of being a net exporter. On the demand side, robust car sales in China as well as solid industrial production data from China, Europe and North America are propping up lead prices.
In short, the underlying fundamentals of the lead market have been strong this year.
Were there any surprises that affected lead that the market wasn’t expecting?
Demand from producers of stationary industrial batteries, which use lead, was expected to continue to grow but turned out to be subdued. Moreover, Donald Trump’s victory was expected to boost base metals on the back of the promise to rebuild the country’s infrastructure, which has not happened yet. Also, market participants were caught by surprise by China’s bold enforcement of antipollution measures which disrupted supply.
What was the biggest news in the lead industry this year?
The biggest news is likely the length and scope of the environmental inspections in China, which some analysts say are the most severe in the country’s history and have lead China to become a net importer rather than a net exporter of lead.
Lead Outlook 2018
What key trends do you predict for the lead market in 2018?
The key trends in the lead market in 2018 are expected to mirror those of this year: Ongoing tightness in the underlying fundamentals and a mismatch in supply and demand, will continue to support lead prices.
Are there any concerns about the lead market for next year?
The biggest question in the lead market is whether the current price levels will rise further or if they are due to decrease going forward.
What factors should investors be aware of?
Trends affecting lead prices in the New Year are likely to be carried over from this year; supply levels are expected to remain low and will be outpaced by demand. Game changers or surprises would likely be linked to a sudden drop in demand or a surge in supply, which would narrow the supply deficit and thus put downward prices on lead. It is, however, unlikely that demand will decrease significantly or that the supply shortage will decrease markedly.
Oliver Reynolds, Economist
What were the key trends in the natural gas market in 2017?
Natural gas prices dipped sharply at the start of the year on the back of a mild winter in the U.S. and uncertainty over U.S. energy and trade policy. Prices quickly recovering some of the lost ground, but are are still lower than at the start of the year. That said, they have risen in recent weeks on higher residential demand. Nevertheless, prices remain depressed in terms of recent historical standards.
Were there any surprises that affected natural gas that the market wasn’t expecting?
Hurricanes Harvey and Irma caught many by surprise, although the impact on the natural gas market was fairly limited, as U.S. shale production picked up most of the slack left by the temporary shutdown at natural gas production facilities.
What was the biggest news in the natural gas industry this year?
The biggest news was probably the continued march of the U.S. shale gas industry, with a slew of new projects currently in development including substantial improvements to pipeline infrastructure. The country is fast becoming one of the industry’s major players.
Natural Gas Outlook 2018
What key trends do you predict for the natural gas market in 2018?
Natural gas demand looks set to rise further in 2018 thanks to low prices and its better eco-friendly credentials compared to other fossil fuels. Developing economies—particularly China—will account for most of the increase. This should cause prices to tick back up slightly above USD 3 per million British thermal units (MMBtu). However, supply is also set to pick up, driven by greater U.S. shale production and higher output from the Middle East and China. This will likely keep a lid on any big price increase.
Are there any concerns about the natural gas market for next year?
Supply security will remain a serious concern. The threat of militant attacks in Nigeria’s Niger Delta region continue to linger, as will tensions in the Middle East—as evidenced by the ongoing diplomatic spat involving Qatar, one of the world’s key players. Disputes between Russia and the EU over the conflict in Ukraine are also possible.
What factors should investors be aware of?
Developments in the U.S. are sure to hold investors’ attention next year. A key question is the extent to which the U.S. administration will deregulate the country’s energy sector, which could boost natural gas supply. A potential unravelling of NAFTA could also hit U.S. natural gas exports to Mexico, with a consequent knock-on effect on prices.
5-year economic forecasts on 30+ economic indicators for 127 countries & 33 commodities.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of FocusEconomics S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. FocusEconomics S.L.U. takes no responsibility for the contents of third party internet websites.
Date: December 11, 2017
TagsNordic EconomiesUKMENAVenezuelaBrexitEconomic DebtMajor EconomiesEuropean UnionCryptocurrencySub-Saharan AfricaMexicoEuro AreaTPPForexGreeceBanking SectorPortugalOilUnited KingdomTunisiaUkraineAsiaCompany NewsG7AustraliaArgentinaSouth AfricaExchange RateEnergy CommoditiesEastern EuropePrecious Metals CommoditiesColombiaInflationAfricaUSABrazilIMFConsensus Forecastoil pricesHealthcareEmerging MarketsBase Metals CommoditiesIndiaFranceJapanEurozoneBitcoinRussiaSpainAgricultural CommoditiesGoldCanadaUnemployment rateOPECTradeVietnamInfographicCommoditiesIranInvestmentEconomic Growth (GDP)ItalyUnited StatesGermanyTurkeyprecious metalsHousing MarketChinaLatin America
Costa Rican GDP is forecast to grow 2.8% in 2019 and 2.8% again in 2020. Read more: https://t.co/q16b5EQF4o
11 hours ago
Central America: Despite ebbing U.S. momentum, the strong U.S. labor market should continue to support remittances… https://t.co/sU8LYPh1Cp
13 hours ago
Congratulations to the top forecasters for Asia-Pacific countries in 2018. We've just announced the winners of the… https://t.co/PgojWwtVGv
14 hours ago
15 hours ago
FocusEconomics analysts project Brazilian growth of 1.8% this year, which is down 0.3 percentage points from last m… https://t.co/lrrjMFnv8o
15 hours ago
- Which will be the most miserable economies in 2019?
- Only by freeing Nigeria from its dependence on oil can Buhari truly take Africa’s giant to the next level
- An Analysis of President Trump’s 2020 Budget
- The World's Fastest Growing Economies
- President Sebastian Piñera aims to bring his elder brother’s private pension system into the 21st century
- Brexit Scenarios: Consensus of 14 Economic Analysts
- Sweden just formed a new government and approved its 2019 budget: what does it mean for the economy?
- Which countries have the highest public debt levels?
- Predictions for the global economy in 2019 from 13 experts
- Gurdgiev: Predictions for the global economy in 2019
- Daniel Lacalle's ideas for 2019: Change of cycle.
- Vietnam Poised to Profit from Free Trade Agreement Opportunities
- Canada in 2019: Interview with a Top Economic Forecaster
- Pound Sterling 2019 Exchange Rate: Projections from Leading Analysts
- Expectations for Latin America’s Economy in 2019
- Ethiopia and Rwanda: From Destruction to Development
- Key commodities trends to look out for in 2019
- What drove Gulf neighbors to bail out Bahrain?
- The Four Financial Bubbles and Their Impact on the U.S. Economy
- The Poorest Countries in the World
- Italy: The sick man of Europe
- What does Bolsonaro's presidential win mean for Brazil's economic outlook?
- The World's Top 10 Largest Economies
- In Latin America, taxpayers are tapped to shoulder the burden of a bank bailout
- How and when will the next financial crisis happen? - 26 experts weigh in
- China and Africa: A partnership under the spotlight
- The conditions are ripe for a Global Financial Crisis 2.0
- Uncertainty, instability and fear haunt a generation of Argentinians
- 5 things: What to expect for Mexico's economy in 2019
- 5 things: Brazil's economic downturn and what to expect going forward
- Emerging Market Currency Crisis: Everything you need to know
- Which ASEAN countries are most exposed in the event of a U.S.-China trade war?
- 75 Top Economics Influencers to Follow
- Emerging Markets Economic Outlook 2018 and 2019
- The Faces Behind Latin America’s Key Institutions
- 2019 Economic Outlook for the Top Oil Producing Countries
- Is your cup of coffee about to get more expensive going in to 2019?
- The Economic Implications of an Aging Global Population
- Railway Mania: The Largest Speculative Bubble You’ve Never Heard Of
- Can the Wisdom of the Crowds predict the results of the 2018 World Cup?
- From Riches to Rags: Have Cryptocurrencies Crashed for Good?
- Investment looks to Latin America, but forecasts are not encouraging
- Turkey: Erdogan has cemented his grip on power - now what about the economy?
- How can Latin America’s business environment benefit from technological change?
- Mexico: A look at the past, present and future as elections yield AMLO victory
- Italy’s New Populist Government and the Eurozone: Prelude to a Crisis?
- Latin America moves toward increased integration as U.S. protectionism grows
- How can Latin America increase productivity without affecting the quality of employment?
- How will Saudi Arabia's economy benefit from lifting the women's driving ban?
- Which countries are the most prepared for the upcoming digital revolution?
- India Under Pressure from the U.S. on Trade Policy
- The Story of Steel
- Latin America is the World Leader in eCommerce Growth Despite Serious Challenges
- What the TPP means for trade in Latin America
- Elections in Russia: Analysis and Implications
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- The Economic Effects of Trade Protectionism
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Venezuela's Electoral Conundrum
- Gold: The Most Precious of Metals (Part 3)
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- FocusEconomics Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 100-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit