After staggering through much of 2016, figures released this morning by the Bank of Nova Scotia indicates there's a light at the end of the tunnel for resources in this country.
The Scotiabank Commodity Price Index gained 6.2% m/m in December as a large oil & gas gain complemented monthly gains in all other sub-indices. Commodities are expected to benefit broadly from rising prices in 2017 after many averaged cycle-lows last year.
Prices for North American benchmark WTI have been moderately upgraded and are now forecast to average $58.00 U.S. per barrel in 2017 and $61.00 per barrel in 2018. Three key trends that will shape the oil market in 2017 are compliance by members of the Organization of the Petroleum Exporting Countries; the strength and pace of the U.S. shale patch's rebound; and the persistence of global demand on growth.
The bank goes on to say base metals are expected to gain from a more buoyant global economy and rising manufacturing activity. Copper saw the most significant outlook adjustment as stronger-than-anticipated Chinese demand runs up against weaker supply growth. Zinc remains the metal with the strongest supporting fundamentals, and the higher 2016 handoff prompted a mild upgrade to price expectations.
The report also says outlook for gold has deteriorated slightly on the back of a stronger macroeconomic outlook, rising inflation and interest rate expectations and a so-far muted market response to political uncertainty. Prices are now forecast to average $1,200 per ounce U.S. in 2017 and 2018, down from $1,300 per ounce prior. However, the market's sanguine view of the risk environment is slanted bullish, and gold is likely to find some support as these views revert to balance.
