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Rally in commodity prices are strong and broad-based: IMF

Oil&Gas Materials 9 July 2009 17:50 (UTC +04:00)

Azerbaijan, Baku, July 9 / Trend , N.Ismayilova/

At the same time, commodity prices have rebounded ahead of the recovery. The recent rally in commodity prices has been, reflecting improved market sentiment, U.S. dollar depreciation, and commodity-specific factors, the World Economic Outlook (WEO) by the International Monetary Fund (IMF) said.

"In the oil market, prices have responded strongly to perceptions that market dynamics are shifting from significant oversupply to more balanced conditions," the report says.

This owes in part to improving demand prospects but also Organization of Petroleum Exporting Countries (OPEC) members' strict observance of lower production quotas. Forward markets project oil prices at $74.50 for 2010, not much above current levels, with high excess capacity expected to buffer growing demand.

In this setting, activity and credit growth are likely to remain subdued in many economies. Looking beyond 2010, it remains unclear how structurally weaker private consumption in the United States and other advanced and emerging economies that suffered asset price collapses will be compensated for by stronger demand elsewhere. Currently, expansionary macroeconomic policies and an inventory adjustment are supporting global activity but these are temporary forces.

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