AUCKLAND, NEW ZEALAND / ACCESSWIRE / February 13, 2018 /Experts forecast 3-4% growth across all core regions of the world economy for 2018, as recovery from the 2008 global financial crisis enters its mature stage. An uptick in global commodity demand often follows a rise in financial activity in major economies, notes Abacus-international. In early January, the Bloomberg Commodity Spot Index reached its highest level in four years on reports of significant manufacturing gains around the globe.
The World Bank has forecast prices to increase modestly in 2018 for almost all energy and non-energy commodities, with the exception of fertilizers, metals and minerals. Oil is expected to average $56/barrel in 2018, a 6% rise from $53/barrel in 2017. Continued supply restraint from producers in the Organization of the Petroleum Exporting Countries, coupled with falling crude inventories is expected to support higher oil prices. Agricultural commodities are on track for a modest increase after a sluggish 2017. Grain prices are set to advance 2% year-on-year, while production of edible oils (including soybean and palm oil) will rise by 5%.
Goldman Sachs points to global economic growth as the main driver for rising commodity demand. Central banks around the world, including the US Federal Reserve and the Bank of Canada, have announced plans to raise interest rates this year. The investment firm has argued that since rate increases typically occur when demand for commodities exceed supply, this strengthens the case for stronger raw material prices in 2018. Abacus-international experts assert that while the worldwide economy is forecast to expand at its fastest rate since 2011, the largest sources of demand will continue to be from Asia. PriceWaterhouseCoopers projects that China and India alone will consume 30% of world energy production. Chinese growth is pegged at a healthy 6-7% over the period, however, government environmental policies will determine the actual consumption of materials such as coal.
Several financial factors are supportive of the commodities market outlook in addition to a rise in world demand. Leading economies have yet to wind down favorable monetary policies and stimulus measures that remain in place from previous years of low growth. The European Central Bank announced in December an extension to its quantitative easing program (which makes $36 billion in asset purchases per month) until September 2018. The weakness of the US dollar in the first quarter of the year also encourages commodity purchases, since most contracts are denominated in US currency. The strength of commodities markets will support the government revenues of many emerging economies, including Brazil and Russia. For investors, climbing commodities prices reinforce an overall positive outlook for emerging market countries in the coming year.
With customers in 180 countries throughout Africa, Europe, Latin America, Asia, and the Middle East, Abacus-international is a leading broker in the Contract for Differences (CFDs) market. Established in 1998, the firm's experienced team of financial experts serve retail and institutional customers through 10 trading platforms. Abacus-international specializes in trading for commodities and spot metals, and offers regular webinars, seminars and exhibitions for clients on the financial markets.
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