– but prepare for autumn recovery
Commodities have experienced two major sell-offs in the past quarter driven largely by plunging oil prices on unwinding of speculative positions and IEA releasing strategic reserves. We look for a price rebound in H2 as the current soft patch proves temporary and the euro gains on ECB hikes. Heading into 2012, we continue to project some limited upside to prices of most raw materials despite dollar strength.
We have lowered our oil price forecasts somewhat but leave our end-2012 projections unchanged at USD120/bbl. We now see average oil prices at USD111 this year and USD117 in 2012. Despite the recent clash between the IEA and OPEC and internal OPEC disagreement, we think the cartel will survive and that the Saudis will step up supplies in H2.
Most of our metals forecasts have been left unchanged but we have lowered our aluminium projections a little to reflect a somewhat lower profile for oil prices and hence energy costs.
The drop in wheat has been larger than we projected and we have lowered our forecast profile as a result and now see some upside going into 2012.
Longer term, we still believe that the dynamics of a commodities super-cycle will be in place. This means that despite business-cycle and currency fluctuations, prices of many raw materials will probably see sustained upward pressure for another five to 10 years.
Read more about the Commodities Update here