Commodities Outlook: Oil Price average $40 p/b in 2020

LAGOS (Capital Markets in Africa) – ICE Brent crude oil front-month prices averaged $42.2 p/b in the first half of 2020, constituting a drop of 32.2% from an average of $62.3 p/b in the second half of 2019. The decline in prices was due to the spread of the coronavirus that led to the enforcement of lockdown measures worldwide, which reduced global demand for oil. Also, prices averaged $33.5 p/b in the second quarter of the year, down by 34.7% from $51.1 p/b in the preceding quarter. The decline in oil prices was exacerbated by supply factors in the second quarter of 2020, amid the inability of OPEC and non-OPEC oil producers to reach an agreement on production cuts, which triggered an oil price war between Saudi Arabia and Russia. However, the new OPEC agreement on April 12 to cut production by 9.7 million barrels per day (b/d), as well as the shutdown of wells in the United States and the easing of global lockdown measures, supported oil prices. As such, they averaged$40.8 p/b in June 2020, constituting a rise of 25.8% from the previous month, the highest monthly price average since February 2020. In parallel, Reuters’ oil price poll of 44 industry analysts projected Brent oil prices to average $38 p/b in the third quarter of 2020 and $42.7 p/b in the fourth quarter of the year. The survey expected prices to average $40.4 p/b in 2020, up from an earlier forecast of $37.6 p/b in May. But a global rise in COVID-19cases, which could lead to further restrictions and could slow the economic recovery, is a key downside risk to the price outlook.

Precious Metals: Silver prices to reach $21 per ounce by end-2020 on higher industrial demand
Silver prices averaged $16.6 per troy ounce in the first half of2020, which constituted a rise of 9.1% from an average of $15.2an ounce in the same period of 2019. They also increased from an average of $15 per ounce in April 2020 to $16.3 per ounce inMay and to $17.7 per ounce in June and closed at $18 an ounce July 1, 2020. Prices have largely been driven by higher demand for the metal from the global industrial sector, as countries start to reopen their economies after several months of coronavirus-related shutdowns. The metal’s price is projected to continue to rise and to reach $19 per ounce by the end of September,$21 an ounce by end-2020, and $22 per ounce by the end of June 2021, supported by the ongoing recovery in industrial production, as well as by higher photovoltaic demand. In addition, given the surge in safe-haven demand for precious metals amid the current environment of low U.S. interest rates, some investors are likely to diversify part of their gold holdings by purchasing other metals like silver, which will also support prices.

Base Metals: Nickel prices drop by 20% in the first half of 2020
The LME cash price of nickel averaged $12,471 per ton in the first half of 2020, constituting a decrease of 19.5% from an average of $15,489 a ton in the second half of 2019. Prices declined by 22.5% in the year-to-March 23 and closed at $10,806 per ton, their lowest level since March 2019. The decrease in nickel prices was due to the coronavirus pandemic, which weighed significantly on global economic activity and on-demand for metals. However, prices increased by 20.2% from the March low and reached $12,987 per ton on June 8, their highest level since February 17, 2020. The recovery in prices in the second quarter of the year was mainly driven by supply disruptions due to coronavirus-related mine closures, as well as by strong demand fromChina and by stimulus from central banks around the world. In addition, prices were supported by improving demand prospects globally, as major economies are emerging from lockdown measures. Also, stronger-than-anticipated economic data in Europe and the U.S. increased expectations of a rapid recovery in economic activity, which contributed to the increase in prices. Nickel prices were broadly stable in June, averaging $12,727 per ton, due to rising supply risks, specifically in South America, which offset the downward pressure on prices from concerns about a second wave of the virus and from expectations of a market oversupply.