Market Strategy - Global Commodities Strategy - SEPT 2015


Oil: With Brent crude trading in the USD40.0-50.0/bbl range, prices remain below the level justified by the fundamentals. In the midst of continued uncertainty over China and broader risk-off sentiment, additional downside is possible in the near term. However, we expect a sustained rally into the USD50.0-60.0/bbl range by Q415. Oil prices will remain anchored here until 2018, as global supply growth continues to outstrip the growth in demand. We have downgraded our average price forecasts to USD56.0/bbl and USD55.0/bbl for 2016 and 2017, respectively, compared to an average of USD57.0/bbl in 2015 ( see 'Oil: No Brent Recovery Until 2018', August 17).

  • Industrial metals : We have pushed back when we expect a base in metal prices from 2015 to 2016. The rebound will also be far less strong than anticipated by the market. For instance, three-month LME copper looks set to head into the USD4,500-5,000/tonne range and we forecast average prices will rebound to only USD6,500/tonne by 2019, below the 2014 average of USD6,830/tonne ( see ' Commodities To Base In 2015-2016, Slow Recovery Beyond ' , August 27).

  • Gold: Among this broad weakness, gold prices will remain resilient in H215 as the ongoing EM FX rout will bolster demand for gold in the short term. Although we are positive towards gold prices from a near-term perspective, we expect the rally to lose steam by USD1,200/oz and the multi-year downtrend to remain intact ( see 'Gold Rally Will Be Temporary', August 21).

  • Weaker Real, Cheaper Commodities
    BRL/USD Exchange Rate And S&P GSCI Softs Price Index (RHS - inverted)
    Source: BMI, Bloomberg

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