TORONTO, Jan. 31, 2019 /CNW/ - The prices of most commodities have improved through January as the worst of the market's bearish macro sentiment was reversed, though political uncertainties including the leadership crisis in Venezuela will continue to dominate investors' thinking for the coming month, detailed Scotiabank Economist Rory Johnston in his latest Scotiabank Commodity Price Index published by Scotiabank today. 

While improved, sentiment toward the oil complex remains depressed despite still-healthy demand expectations and rising supply risks. Supply concerns at this stage can be broadly broken out between 1) the rapidly deteriorating situation in Venezuela, 2) a sharp U-turn in Saudi crude output, and 3) downward revisions to flexible US production given lower prices.

"Oil prices have more or less dismissed recent developments and the market seems to be waiting to see the impact of US sanctions against the Venezuelan oil industry, still feeling the whiplash of the White House's Iran flip-flop, before pricing in material supply disruptions. And while the situation in Caracas is evolving and volatile at the moment, at least temporary disruptions feel inevitable and a more rapid decline in the country's oil production is likely," wrote Rory Johnston, Scotiabank Economist. 

Other highlights of the January 31, 2019 Report include:

• Global oil demand remains strong.
• US shale producer growth will likely be constrained by now lower prices.
• Saudi Arabia is pulling an oil output U-Turn, reducing supplies by nearly 1 MMbpd relative to the all-time high reached in November.
• The tragic collapse of a mine waste dam in Brazil has prompted the shut-in of some iron ore assets, which is expected to tighten seaborne prices.

Scotiabank Economics provides in-depth commentary on economic, financial market, and policy developments, both domestically and internationally.

Read the full January 2019 Scotiabank Commodity Price Index online here.

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SOURCE Scotiabank