Outline
Outline
1.11.3
2.02.3
1.6
2.2 2.3
1.91.7
4.9 5.0
4.3
3.7 3.7
4.44.6 4.7 4.7
0
1
2
3
4
5
6
2012 2013 2014 2015 2016 2017E 2018F 2019F 2020F
Advanced economies Emerging and developing economies
Growth is picking up
Source: World Bank, Global Economic ProspectsNotes: E denotes estimate and F denotes forecast as of January 2018.
Percent
Most commodity prices are recovering, albeit very slowly
30
60
90
120
150
180
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Index, nominal terms, 2010 = 100
Post-recession peak 2011:Q1
Post-recession trough2016:Q1
Source: World BankNote: Last observation is April 2018.
Energy
Agriculture
Metals
Prices are much higher than the 1985-2004 average
0
40
80
120
160
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015Source: World Bank.
Agriculture
Metals
Energy
Index, constant US$ (2010 = 100)
Changes (%) in real prices to 2017 from:1986-2004 1998
Agriculture: +33 +31Energy: +101 +202Metals: +70 +101
Outline
20
40
60
80
100
120
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18
The equilibrium of the oil price changed after 2004
Source: World Bank.Note: Weekly data. Volatility is defined as standard deviation of logarithmic changes times 100. Last observation is March 16, 2018.
US$/bbl
January 2011 - August 2014Average price: $104/bbl
Volatility: 2.95
December 2014 – March 2018Average price: $50.24/bbl
Volatility: 4.71
Oil prices are just above their long-term average
Source: World Bank.Note: World Bank average. Last observation is March 2018.
0
30
60
90
120
150
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
US$/bbl, deflated by U.S. CPI (Jan 2017 terms)
1972-2018 average: $56/bbl
Two price cycles after WWII1972 to 1986: Supply driven-cycle associated with oil supply
disruption and major downturn in the global economy. High prices induced production from “unconventional” sources, including Alaska, Gulf of Mexico, and North Sea.
2003 to 2014: Demand-driven cycle with no disruption in the global economy (during the spike) or boost to the global economy (during the collapse). High prices induced production from “unconventional” sources, including US shale, Canadian oil sands, and biofuels.
20
30
40
50
60
70
80
90
2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1
US$/bbl
Range across regions Average
Source: Rystad Energy NASWellCube Premium. Note: Does not include test activity, where well was shut-down after completion. Last observation is 2017Q2.
The costs of shale oil have gone down
0
300
600
900
1,200
1,500
1,800
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
b/d per well
Range across regions Median
Source: U.S. Energy Information Agency.Notes: Range and median are based on five regions (Bakken, Eagle Ford, Niobrara, and Permian). Last observation is March 2018.
U.S. shale well productivity has increased
-3
-1
1
3
5
Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18
Agreement countries Non-Agreement countries Net change Agreed cuts
Cumulative change in oil production since September 2016
Source: International Energy AgencyNote: Bars denote change in oil production relative to September 2016, when the OPEC/non-OPEC cuts were first discussed. The cuts of 1.8 mb/d became effective in January 2017. Last observation is February 2018.
mb/d
Energy prices are closer together
0
5
10
15
20
25
Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18
US$/mmbtu
Source: World Bank.Note: Last observation is March 2018.
Coal (Australia)
Natural gas (U.S.)
Crude oil (World Bank average)
Natural gas prices are closer
Source: World Bank.Note: Last observation is March 2018.
0
5
10
15
20
Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18
US$/mmbtu
Japan (LNG)
Europe
U.S.
Outline
Some metals prices are picking up
0
50
100
150
200
2,000
4,000
6,000
8,000
10,000
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Copper [left] Iron ore [right]
$/mt $/mt
Source: World BankNote: Last observation is March 2018.
5,000
10,000
15,000
20,000
25,000
30,000
1,200
1,600
2,000
2,400
2,800
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Aluminum [LHS]
$/mt $/mt
China dominates metal consumption
Source: World Bank and World Bureau of Metal StatisticsNotes: Last observation is December 2017.
0
1
2
3
4
5
6
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Million metric tons
Rest of the world
China
Outline
Agricultural prices have been stable for more than 3 years
60
80
100
120
140
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Index, nominal terms, 2010 = 100
Source: World Bank.Note: Last observation is March 2018.
Remarkably stable agricultural commodity pricesFood
Raw materials
Beverages
Stock-to-use ratios of key grains have recovered
0.10
0.15
0.20
0.25
0.30
0.35
0.40
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Maize Rice Wheat
Source: U.S. Department of Agriculture.Notes: Update based on the U.S. Department of Agriculture March 8, 2018 data release.
Ratio
Outline
Where are commodity prices heading?
0
40
80
120
160
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Source: World Bank.Note: The period 2018-30 refers to forecasts, as of April 2018.
Agriculture
Metals
Energy
Index, real (2010 = 100)
Forecasts as of April 2018
20
30
40
50
60
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
OECD, actual Non-OECD, actualOECD, projected in 2005 Non-OECD, projected in 2005
History of oil consumption and prospects—as envisaged in 2005
Source: International Energy Agency and World Bank.Note: The projection was taken from the 2005 IEA World Energy Outlook.
mb/d
50
60
70
80
90
100
110
120
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
World World excl. China
Index, 1995=100
China has reversed the global metals intensity
Source: World Bureau of Metal Statistics.
2
4
6
8
10
12
14
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
World OECD Non-OECD
Oil and energy intensity of GDP have been declining
Source: BP Statistical Review and World Bank.
Barrels of oil per $10,000 of GDP
5
10
15
20
25
30
35
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
World OECD Non-OECD
Barrels of oil equivalent per $10,000 of GDP
Oil Energy
Consumption against income in per capita terms
Source: BP Statistical Review and World Bank.Note: Consumption per capita vs. GDP per capita (1965-2016).
Oil Natural gas
0
1
2
3
4
0 10,000 20,000 30,000 40,000 50,000
EM7 ex China China
G7 South Korea
tons of oil per capita
GDP per capita
0.0
0.5
1.0
1.5
2.0
0 10,000 20,000 30,000 40,000 50,000
EM7 ex China
China
G7
South Korea
tons of oil equivalent per capita
GDP per capita
Consumption against income in per capita terms
Source: BP Statistical Review and World Bank.Note: Consumption per capita vs. GDP per capita (1965-2016).
Coal Aluminum
0.0
0.5
1.0
1.5
2.0
0 10,000 20,000 30,000 40,000 50,000
EM7 ex China China
G7 South Korea
ton of oil equivalent per capita
GDP per capita
0
5
10
15
20
25
30
35
0 10,000 20,000 30,000 40,000 50,000
EM7 ex China China
G7 South Korea
kg per capita
GDP per capita
Consumption against income in per capita terms
Source: BP Statistical Review and World Bank.Note: Consumption per capita vs. GDP per capita (1965-2016).
Copper Zinc
0
5
10
15
20
25
0 10,000 20,000 30,000 40,000 50,000
EM7 ex China China
G7 South Korea
kg per capita
GDP per capita
0
2
4
6
8
10
12
14
0 10,000 20,000 30,000 40,000 50,000
EM7 ex China China
G7 South Korea
kg per capita
GDP per capita
-
1
2
3
4
5
6
7
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Consumption Net Exportsmb/d
Iran’s oil production
Source: BP Statistical Review, International Energy Agency.Note: Production includes crude oil and liquids.
0
1
2
3
4
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Consumption Net Exports
Venezuela’s oil production
Source: BP Statistical Review.Note: Production includes crude oil and liquids.
mb/d
-4.3
-5.6
-4.1
-4.3
-2.3
-1.5
-0.9
-6 -5 -4 -3 -2 -1 0
Arab oil embargo
Iranian revolution
Iran-Iraq war
Kuwait invasion
Iraq war
Libyan civil war
Sanctions on Iran
Oct 1973 – Mar 1974
Nov 1978 – Apr 1979
Oct 1980 – Jan 1981
Aug 1990 – Jan 1991
Mar – Dec 2003
Nov 2011 – Oct 2012
Conflict-driven oil supply reductions in historical context
mb/dSource: International Energy Agency and World Bank
Feb – Oct 2011
US oil production exceeded its 1970 record of 10 mb/d
Source: U.S. Energy Information Administration
3.0
5.0
7.0
9.0
11.0
Jan-70 Jan-73 Jan-76 Jan-79 Jan-82 Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18
Mb/d
U.S. shale boom
49%
20%
30%
40%
50%
60%
70%
1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-09 2010-15 2017
Non-OPEC oil producers that agreed to cutsOPEC oil producers
OPEC’s role in the global oil market
Source: BP Statistical Review and International Energy AgencyNotes: Columns denote 5-year averages, except the last which refers to 2017.
Shares of global oil production
OPEC today
POWER: It is less powerful compared to the 1970s. It asked for “assistance” from key non-OPEC producers to make the cuts effective.
COHERENCE: It appears to be less coherent compared to the past because of: (i) political fractions within and (ii) some members cannot “afford” supply cuts.
COMPETITION: Commodity agreements have a poor record. They are successful initially, but non-members gain market share and eventually become efficient suppliers. A case in point is the U.S. shale oil industry, now acting as a counterweight to OPEC. A historical example is the International Coffee Agreement.
SUBSTITUTION: Agreement-induced supply cuts make substitute (natural or synthetic) products more competitive. A historical example is the International Tin Agreement whose supply cuts made aluminum competitive.
OPEC today
POWER: It is less powerful compared to the 1970s. It asked for “assistance” from key non-OPEC producers to make the cuts effective.
COHERENCE: It appears to be less coherent compared to the past because of: (i) political fractions within and (ii) some members cannot “afford” supply cuts.
COMPETITION: Commodity agreements have a poor record. They are successful initially, but non-members gain market share and eventually become efficient suppliers. A case in point is the U.S. shale oil industry, now acting as a counterweight to OPEC. A historical example is the International Coffee Agreement.
SUBSTITUTION: Agreement-induced supply cuts make substitute (natural or synthetic) products more competitive. A historical example is the International Tin Agreement whose supply cuts made aluminum competitive.
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17
OECD China ROW
Signs of slowdown in China’s metal consumption
Source: World Metal StatisticsNotes: Last observation is December 2017
mmt, year-on-year change
50
80
110
140
170
200
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Agriculture price index ENSO Index peaks
Index, deflated by U.S. CPI, January 2010 = 100
-12.6%-19.6%
1.4%-2.9%
-0.9%-2.2%
-6.5%-7.3%
10.4%9.8%
3.8%-3.5%
-7.1%-14.8%
Agricultural prices show little correlation with weather cycles
Source: World Bank and National Oceanic Atmospheric Administration.Note: The numbers denote percent changes of the six-month average leading to the ENSO peak compared to the previous six-month period (bold) and the corresponding six-month period of the previous year (italic). The last observation is February 2018.
The strongest El Niño on record, 1997/98
2.4
21.4
11.3
22.6
5.7
8.6
24.8
3.7
12.0
18.7
22.2
21.8
50.4
49.4
50.5
12.5
- 15 30 45 60
GDP
Population
Edible oils
Grains
Base metals
Iron ore
Coal
Crude oil
Share of world total (percent)
2014-16
1990-92
Could India become the next China?
Source: World Bank, BP Statistical Review of World Energy, World Bureau of Metals Statistics, U.S. Department of Agriculture
1.2
16.5
9.3
9.9
1.8
1.9
5.2
1.9
3.0
17.8
13.5
9.7
3.0
5.4
10.5
4.4
- 15 30 45 60
GDP
Population
Edible oils
Grains
Base metals
Iron ore
Coal
Crude oil
Share of world total (percent)
2014-16
1990-92
China India