Afreximbank African Commodity Index for the third quarter of 2020 stated that Oil prices are expected to rise around 10 per cent over the next year.

According to the index, which measures commodity prices every quarter, the oil industry is expected to emerge from stagnation as global travel and global oil demand move towards pre-pandemic levels.

Afreximbank however stated that the oil industry would need to clear the backlog of compensatory supply cuts, noting that suppliers like Iraq and Nigeria had initially breached output quotas.

It noted that suppliers like Iraq and Nigeria had initially breached output quotas.

The AACI said, “Sentiment on commodity prices is generally conservative with market consensus forecasting prices to stay within a tight range compared with current spot prices. Crude oil, coffee, CPO, cobalt and sugar are the few exceptions to this view.”

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Nigeria had made its plans known to the OPEC secretariat in Vienna that it will make up for its 180,000 barrel-a-day overproduction in May by cutting an extra 45,000 a day each month between June and September.

According to the index, the impact of the coronavirus pandemic affected the oil markets the most.

The AACI stated that there were declines for the base metals and agricultural commodities sub-indices, which fell 20 per cent and nine per cent respectively over the same period.

In contrast, it stated that precious metals rose nine per cent quarter-on-quarter especially due to haven demand for bullion. Analysts at Afreximbank said prices derived support in July and August from an increasingly positive global growth outlook as economies started to reopen following the COVID-19 lockdown.

It added that poor access to Libyan crude, shrinking US oil inventories and a dent to US shale operations, including increases in the cost of capital, all contributed to lifting oil market sentiment.