Political unrest in the Middle East might have positive effects for commodities investors in the near term.
According to Scotiabank’s monthly commodity price index report published Monday, political disarray in North Africa and Asia has helped oil and precious metals prices rise.
The index saw a 2.7% increase month-over-month in January, signalling the seventh consecutive monthly gain as the commodities bull continued to charge forward.
And the market doesn’t show signs of slowing any time soon.
“Overall commodity prices will likely edge higher again in February, though momentum has shifted late-month from strength in base metals to oil and precious metals, given growing political unrest in Libya, Algeria and parties of the Middle East,” said Patricia Mohr, vice-president, economics and commodity market specialist, at Scotiabank.
In the last month, the price per ounce of gold climbed US$71 to US$1,413.
According to the report, Canadian oil prices are expected to climb in February and March, given a recent “spike” in benchmark West Texas Intermediate (WTI) and international oil prices.
Last week, WTI oil prices clumbed US$11 to US$97.88 per barrel.
Mohr said curtailed exports from Libya coupled with unrest in Algeria, both of which are oil producers, have driven recent price rises.
Still, Mohr noted that Saudi Arabia, the world’s largest oil producer, has increased output above the nine million barrels per day mark to “offset” curtailed Libyan supplies.
“Saudi Arabia has made significant investments to boost its capability in recent years, and has at least 3.5 mb/d of spare capacity, which can be brought into production within 30 days … The stability of Saudi Arabian oil supply is therefore of critical importance,” Mohr said.
At press time, the WTI oil price was down US$0.33 to US$97.56.