- Outlook for commodities constructive heading into 2013
- Deutsche particularly bullish on precious metals
- ANZ expects high oil prices will continue
- Goldman Sachs updates preferred energy exposures
- Further gains in iron ore prices likely
- Fundamentals suggest aluminium looks toppy
By Chris Shaw
Given the assumption world economic growth will accelerate to 3.4% next year, the US dollar will remain weak and the S&P 500 moves higher, Deutsche Bank suggests the macro environment is constructive for commodities heading into 2013.
Adding to the positive outlook in Deutsche's view is European Central Bank (ECB) action has reduced downside tail event risk for the eurozone, while further liquidity injections from the US Federal Reserve are likely to support investor appetite for risk assets such as commodities.
To reflect this, Deutsche remains bullish on the outlook for precious metals, forecasting gold prices will rise to US$2,200 per ounce over the course of 2013. Pushing prices will be negative real interest rates, ongoing central bank buying, the potential for further QE by the Fed and a weaker US dollar.
In energy Deutsche expects geopolitical risk will sustain price spike risk across the complex, but the US Presidential election and high gasoline prices will keep speculation of a release of strategic reserves alive.
Key issues for industrial metals include the US fiscal cliff, as Deutsche notes this has negative implications for growth in the US economy. As noted, when US Treasury debt was last downgraded in August of last year oil and industrial metal prices suffered the most.
The strong gains in food prices seen over the northern summer months are now fading, but Deutsche notes fundamentals in some markets such as corn remain tight. A developing El Nino is a threat to Australian crops, especially as it may mean a downgrade to expected wheat production.
Deutsche suggests industrial metal prices may struggle to sustain recent strength given ongoing concerns with respect to the growth outlook for China. A more sustained rally in the base metals appears to depend more on reflationary measures in China, which Deutsche expects will only become more apparent in the early stages of 2013.
In oil, ANZ Banking Group expects higher prices will remain through 2013 due to a combination of ongoing supply issues and stronger demand. The demand side will be helped by further stimulus measures in the US, as well as a seasonal pick-up as the market enters the fourth quarter northern winter heating oil period.
On ANZ's numbers, demand growth will strengthen to 1.8% in 2013, implying growth of an average of 91.1 million barrels per day. Stronger growth in the US at 2.5% and in China at 5.9% should offset stale growth in Europe in the bank's view.
One trend expected by ANZ in 2013 is for the Brent/West Texas Intermediate (WTI) spread to narrow, this as European crude loses market share in the Gulf of Mexico to growing domestic supplies in the US and stronger unconventional liquids production from Canada.
On the supply side, Deutsche Bank expects Saudi crude availability will improve from this month given the end of peak summer demand for crude for power generation. This is significant, as Saudi Arabia is estimated to source nearly 60% of its power generation from crude oil well above the average of about 35% for the Middle East as a whole.
On the other side of the equation, Deutsche notes Saudi spare capacity remains constrained holding below two million barrels per day since February. This suggests the cushion for dealing with any supply shortfalls remains thin in Deutsche's view.
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