We present updated commodity price forecasts
Key themes
The OPEC and non-OPEC deal to cut output, La Niña weather and the demand-push from new US President Donald Trump's plan to increase fiscal spending on infrastructure and defence have not resulted in significantly tighter commodity market conditions to start the year. Most prominently, US crude stocks continue to rise in seasonally adjusted terms, highlighting that although market conditions in 2017 will likely be the tightest in years there is still an abundance of supply available to limit the upwards impact on prices from this development. USD has weakened somewhat to start the year. On a 1-2Y horizon we look for additional USD weakness to be a supportive factor for commodity demand and prices.
Oil
OPEC and Russia's decision to cut output has lifted oil prices, but market conditions have not tightened as expected, highlighted by rising US crude stocks. We look for prices to rise further, mainly on the back of stronger demand and a weaker USD. We recommend consumers to hedge exposure in Q4 17 and 2018.
Metals
Trumpflation has hit the world base metals market, supporting prices on top of the effect from higher global manufacturing activity and declining upstream supply. We recommend that consumers hedge exposure in nickel in 2017 and 2018 and copper in 2017 at current levels.
Grains
Prices remain lower on strong supply fundamentals. La Niña weather has not had a material impact on the market. Consumers should hedge 2017 and 2018 in CBOT wheat, CBOT soybean and rapeseed.
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