• In October, indicators of global economic activity were mixed, casting some doubt over signs of recovery in the advanced economies that emerged in previous months. The upturn is still under way, but the pace of industrial growth and business sentiment in some big advanced economies has stopped improving. Activity in emerging economies has also varied.
• Volatility has remained a feature of financial and commodity markets given political uncertainties and hesitation over the timing of US Fed tapering.
• Oil prices were lower on balance in the month from the dissipation of geopolitical risks in the Middle East and data on rapid crude stocks accumulation in the US. However, WTI was disproportionately weighed down by the political uncertainty in the US while Brent was supported somewhat by renewed unrest in Libya. As such, the differential between Brent and TWI is wider than at anytime since March this year.
• Steel input markets have been held up by improved activity in China, but we are entering a seasonally soft period for construction which should keep prices relatively range bound for the rest of the year. Thermal coal prices have now lifted slightly from their recent floors.
• Base metals prices rose modestly in October, helped by stronger than expected growth in China in the September quarter as well as reduced fears of a potential US economic meltdown.
• With the market currently anticipating no change to the Fed’s asset buying program until early 2014, investors seem reasonably comfortable holding gold in their investment portfolios, providing some support to prices in the second half of October. Nonetheless, the average price was around 2½% lower in October.
• Overall, our forecasts for commodity prices have been left largely unchanged. Our near-term forecasts for some metals were raised slightly, while we have also widened our forecast for the WTI-Brent spread. We continue to expect only a modest recovery in demand over the forecast horizon, but the recovery is expected to be bumpy, ensuring ongoing volatility in commodity markets.

For further analysis download the full report.

• Commodity Update: Minerals and Energy – October 2013 (PDF 240 KB)