Monthly Economic Review of Commodity Markets: June 2011

After seeing an unprecedented rise since December 2010, global commodity markets for agricultural commodities, energy and metals suffered an abrupt correction in May 2011. Uncertainties in the global economic recovery, a stronger US dollar and speculative commodity sell-off during the month were factors contributing to a monthly decline in prices across commodities. The prospects of volatile commodity prices in 2011 maintain downside risks for the global economic recovery.


The rise of global commodity prices between early 2009 and early 2011 has been dramatic. High demand of commodities mainly from faster-growing emerging and developing economies as well as the use of commodities as a financial asset in an environment of near-zero interest rates (following the global financial crisis) in advanced economies were factors contributing to sustained price rises. However, in May 2011, the rising trend in global commodity prices experienced a halt with all categories of commodities (energy, food and beverages and metals) declining over the previous month.

New challenges facing the global economic recovery, like rising global inflation and slowdown in global manufacturing activity, together with a stronger US dollar and a broad commodity sell-off during the month were amongst the factors conducive to a generalised decline in commodity prices compared to the previous month. In the case of some commodities within the metals group, like lead and tin, the monthly price drop was marked and in excess of 10.0%.

Easing commodity prices observed in May 2011 may partly alleviate inflationary pressures that threaten the global economic recovery. Besides fuelling inflation, high prices of commodities are creating cost pressures for companies and reducing purchasing power of consumers, entailing also potentially high social costs especially in the case of food commodities.


Global energy prices influence inflation and thereby impact both businesses and consumers. Rising energy prices not only lower the purchasing power of consumers, but can also lead to higher running costs and rising wages affecting the profitability of businesses.

  • In its monthly oil market report for June 2011, the Organisation of Petroleum Exporting Countries (OPEC) suggested that the supply demand balance for H2 2011 will be tight as global inventories continue to decline owing to rising demand. In the second half of 2011, Japan is likely to impact demand as reconstruction efforts begin following the earthquake and tsunami in March 2011 while emerging and developing countries are expected to further boost demand in the coming months;
  • In May 2011, the commodity fuel (energy) index decreased by 6.2% month-on-month (m-o-m), registering its first monthly decline since July 2010. After reaching a 33-month high in April 2011, crude oil prices eased in May 2011 owing to uncertainties in the global economic recovery, a stronger US dollar and speculative commodity sell-off during the month. Despite reduced oil demand from the North American market, tightening supply from OPEC member countries may add to upward pressure on prices over the coming months;
  • Easing energy prices observed in May 2011 could partly alleviate inflationary pressures that are threatening the global economic recovery. In April 2011, annual inflation reached its highest level in over two years in all G7 economies, creating higher running costs (including higher wages) for companies and reducing consumers’ purchasing power.

Crude Oil Spot Prices: May 2010 – May 2011


US$ per barrel

Source: Euromonitor International from EIA/IMFNote: (1) Brent crude is a major classification of oil, used to price two thirds of the world’s internationally traded crude oil supplies. West Texas Intermediate (WTI Cushing) also known as Texas Light Sweet, is a type of crude oil used as a benchmark in oil pricing. (2) Data refer to average monthly prices. (3) Data is not seasonally adjusted.