Market Strategy - Global Commodities Strategy - NOV 2015

Oil: we continue to believe oil prices will stage a gradual recovery over the rest of 2015 as US shale production is being responsive to lower prices and has been weakening in recent weeks. However, any substantial gains in the price over the short term will be rapidly pared by profit-taking and we expect oil price weakness to persist into 2016. We maintain our below-consensus 2016 forecasts for Brent and WTI at USD56/bbl and USD53/bbl respectively ( see 'Brent On Board For A Bumpy Ride', October 15).

  • Industrial metals: The worst of the declines in metal prices are behind us and we forecast stabilisation over the remainder of 2015 and 2016. However, there will not be a significant rebound as an extended period of low prices will be required to rebalance oversupplied markets, particularly iron ore, copper and aluminium. Our price forecasts for 2016 and beyond are significantly below consensus estimates.

  • Gold: Although the US Federal Reserve has steadily turned more dovish over 2015, we still expect a gradual hiking cycle over the coming quarters (100bps by end-2016). This will place downward pressure on gold prices. External market volatility (Shanghai equities, CNY) will prevent a more dramatic decline in gold demand and prices and we forecast an average of USD1,150/oz in 2016 compared to USD1,175/oz in 2015.

  • Range Trading In 2016
    S&P GSCI Industrial Metals Index (monthly chart)
    Source: BMI, Bloomberg

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