The Scotiabank Commodity Price Index gained 2.2 per cent month over month in February; the bank says oil prices in 2017 will be affected by OPEC and non-OPEC country production cuts, as well as U.S. shale recovery
TORONTO—The Scotiabank Commodity Price Index gained 2.2 per cent month over month in February as industrial commodities continue to benefit from healthy demand, and according to the bank, the oil market’s recovery remains on track but fragile.
Scotiabank says OPEC news will continue to drive near-term market sentiment, especially ahead of the trade group’s May. 25 meeting to decide whether or not to maintain production cuts for another six months.
“We’re now in the third month of OPEC production cuts and compliance within the OPEC-11 has been surprisingly strong. We believe that the combination of high OECD inventories, still-weak upstream investment outside the U.S. and recent oil price weakness will prompt OPEC to extend their production cap through the end of the year,” said Rory Johnston, commodity economist at Scotiabank.
Prices for the North American crude oil benchmark West Texas Intermediate have been downgraded and are now forecast to average $53 per barrel in 2017 and $56 per barrel in 2018.
Scotiabank says the four key trends that will shape the oil market for the remainder of 2017 are OPEC output discipline; the pace of the U.S. shale response; non-OPEC production declines outside the continental U.S.; and the strength of consistently-underestimated global demand growth.
The bank also says that non-OPEC oil producing countries will be essential to meet future supply needs, as they are nearly equal to OPEC in size.
Other highlights in Scotiabank’s latest Commodity Price Index report include: