Commodities Forecast - Global Commodities Strategy

13 Mar 2015

Glo bal

Co mmo ditie s

With c ontinued s trong s upply growth and s luggis h demand, Brent Crude pric es will remain low and volatile in H115. In fac t, rapid c rude inventory buildup, partic ularly around the Cus hing trading hub, pos es a major downs ide ris k to pric es for the c oming months . We forec as t global benc hmark Brent to
trade at an average of USD55.0/bbl in 2015.
In line with our medium-term bearis h view on gold, we s ee pric es on the brink of a s harp move lower. Fundamental and tec hnic al fac tors point to
additional dec lines , and a pus h through USD1,150/oz would s ee us target USD1,000/oz over the c oming months . Suc h a move would be in line with the
degree of US dollar s trength agains t major c urrenc ies s inc e January 1 2015 (see 'Gold On The Brink', March 10).
The narrowing of the s pread between As ian and European gas pric es will be s us tained over 2015 and 2016 - with As ian and European gas pric es s et to
move within a tighter trading range. A fall in the As ian pric e premium will pers is t due to lower oil-indexed LNG pric es and overs upply in the As ian market
(see 'Asia-Europe Gas Prices To Remain In Narrow Range', March 9).
Copper pric es c ould lead industrial metals higher in a temporary relief-rally over the c oming weeks . We s ee potential for s hort-c overing in the c opper
market as s pec ulative s entiment s unk to a bearis h extreme in February. We do not expec t gains to be s us tained and retain the bearis h indus trial metals
view in our s trategy table (up by 16.2% as of Marc h 13).
Grains pric es will remain weak in Q115 due to a s trong US dollar and good weather in s outhern hemis phere growing areas . Pric es will head higher later in
2015 and overall average higher than c urrent front-month levels . Supply dis ruptions , partic ularly in South Americ a, are the key ups ide ris k.
The ongoing weaknes s in the Brazilian real will c ontinue to drag sugar and coffee pric es lower over the c oming weeks . We remain more pos itive regarding
other s ofts and s ee cotton, cocoa and milk pric es to average higher than c urrent front-month levels .

Prices Set To Move In A Tighter Trading Range

Global Gas Pric es - NBP, Henry Hub And Generic Firs t JKL Future (USD/mnBTU)

Sourc e: BMI Calc ulation, Bloomberg

G L O BAL C O M M O DITIES S TR ATEG Y

Entry Date

Entry Level

Gain/(Loss)

Rationale

08-De c-2014

1,910

3.49%

Glo bal marke t to tighte n due to le ss favo urable we athe r co nditio ns

22-Se p-2014

1,372

16.21%

Co ppe r, aluminium and nicke l to we ake n o ve r a six-mo nth ho rizo n.

AGRICULTURE
Bullish July 2015 LIFFE Co co a
ENERGY
METALS
Be arish industrial me tals (S&P GSCI to tal re turns inde x)
S o u r ce : B MI , B lo o m b e r g . U p d a te d Ma r ch 13 2015

This mate rial is pro te cte d by inte rnatio nal co pyright laws, and use o f this is subje ct to o ur Te rms & Co nditio ns.
2015 Busine ss Mo nito r Inte rnatio nal Ltd

This mate rial is pro te cte d by inte rnatio nal co pyright laws, and use o f this is subje ct to o ur Te rms & Co nditio ns.
2015 Busine ss Mo nito r Inte rnatio nal Ltd