EIU Commodity Price Forecasts

The Economist Intelligence Unit expects commodity prices to ease in the second half of 2011 as global liquidity conditions tighten and as slower economic growth in China—a major consumer of raw materials—reduces demand in that country. We expect commodity prices to fall further in 2012, though for the most part prices (especially for agricultural commodities) will remain at historically high levels. The political upheaval in MENA has added a risk premium to the price of oil. But we do not anticipate conflict occurring in other major oil producers on a scale similar to that in Libya—as a result, and as oil installations in the region in any case tend to be in remote locations and well guarded, further severe disruptions to oil output look unlikely. Brent prices will soften to an average of US$94.5/b in 2012.