The year 2017 was a spectacular year for commodity prices, while 2018 has also started on a positive note but to get the outlook for the future, CNBC-TV18 spoke to Mark Keenan, Head of Commodities Research - Asia at Societe Generale.
He said the house has increased their fundamental price forecast for Brent crude upto USD 62 per barrel, which means we still remain bearish with respect to forward prices and current prices. Therefore, there is about USD 6-7 risk premium in the market currently.
The reason for the fall in prices could be varied, said Keenan. One is the cold winter in Japan and North America, which was supporting the prices won’t last forever. Moreover, some of the geopolitical risk issues are starting to ease and easing in areas like Libya, Iraq etc, as well Q2 is also a seasonal slowdown period.
He also expect Russia and OPEC to maintain their compliance with regards to output quotas for rest of the year and the US shale production to increase about a million barrels of crude production this year but currently, that growth is offset by declines in some of the OPEC producing countries like Venezuela and Iraq. So, it broadly balanced market.
With regards to metals, he said the base metal complex did well last year and continues to be supported by dollar weakness at the momentum, by anticipated supply deficits and declining inventories.
According to him, nickel, lead and copper could see some upside. With regards to copper, there could be some output disruptions, helping prices remain elevated.
The house has a negative view on gold for Q4 of this year in context of three interest rate hikes in US, lack of physical demand in Asia, increasing in recycling of gold in Asia. Gold is likely to trade around USD 1200-1250 per ounce for Q4.
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