Energy Prices Rise More than Other Commodities in 2021 – EIA
Energy prices increased more than any other commodities in 2021, with prices used in the S&P Goldman Sachs Commodity Index ending the year 59% higher than the first trading day of 2021, the US Energy Information Administration reported on Monday.
Projecting for the year, Wells Fargo sees a favourable outlook on commodities. Most other commodity indexes included in the GSCI rose by about 20%, and the precious metals index was the only one to decline, the agency reported.
The energy index increased more than twice as much as the industrial metals index on a percentage basis during 2021, the next highest commodity index group price change, the EIA said.
Energy price increases were mostly driven by higher demand from global economic recovery from the pandemic. Other factors that contributed to rising prices include weather disruptions such as the February winter freeze and Hurricane Ida, according to the report.
Last year, the energy index group accounted for 54% of the GSCI, and the West Texas Intermediate and Brent crude oil benchmarks accounted for about 70% of the weighting in the energy sector index, the EIA said.
Prices in energy commodity futures markets saw significant increases through the year. The futures price of RBOB, the benchmark for gasoline trading, jumped 67%.
Prices for petroleum products such as RBOB increased the most during 2021, while prices for crude oil such as WTI and Brent increased by slightly less at 62% and 55%, respectively, according to the EIA.
Natural gas prices increased the least among energy commodities at 38%, which is still a large increase.
Wells Fargo Sees Favourable Outlook on Commodities: Commodity prices are expected to continue rising in 2022, but a repeat of the strong performance since their 2020 low is unlikely, Wells Fargo Investment Institute said in a Monday note.
Wells Fargo enters the year favourable on commodities, with large, well-capitalized and broadly diverse midstream energy companies expected to fare better than some of their energy peers, the bank noted.
Rising demand and tepid supply growth are anticipated to keep commodity prices on an upward trajectory during the year, according to Wells Fargo.
Demand is expected to rebound to new post-coronavirus highs so long as the global economic recovery continues, mobility restrictions ease, pent-up activity levels normalize and the pandemic fades, Wells Fargo said.
Commodity supplies will still be restrained by pandemic-related issues, production discipline and the energy transition, the bank said.
A good example of this dynamic can be seen in the oil market, with supply discipline from the Organization of the Petroleum Exporting Countries and their allies, or OPEC+, and US oil producers amid demand recovery expected to support higher prices, Wells Fargo said.
Higher oil and gas prices and additional volumes would be an attractive environment for midstream energy companies, which offers a sizable dividend yield that Wells Fargo sees as sustainable after years of cuts and balance-sheet repair. #Energy Prices Rise More than Other Commodities in 2021 – EIA
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