Dec 24 It’s always tempting for commodity analysts to issue forecasts for the coming year, even though we intrinsically know that the future is inherently uncertain and even the most reasoned expectations can be easily confounded by events.
With that in mind, and with a nod to my fellow Australians’ love of a punt, I’ve decided rather to do a list of bets I may be tempted take in commodity markets in 2016, assuming I was allowed to wager.
1. Crude oil will trade both below $30 a barrel and above $60 in 2016.
Logic and momentum suggest the first part of this bet is a no-brainer, with both Brent and WTI crude already having tested below $35 a barrel. The second part relies on history repeating itself insofar as when the bottom is reached, the rebound tends to be rapid.
2. Thermal coal will snap five years of losses in 2016.
Coal has been unloved for so long, but it is also further down the path of supply rationalisation than other commodities. Using Australia’s Newcastle spot index as the benchmark, there may just be room for optimism on the view that demand for higher-grade coal in Asia will remain solid, even in China, and supplies certainly won’t be growing much, if at all.
3. Iron ore won’t drop below $30 a tonne in 2016.
This is a bet which may seem risky, given iron ore remains vastly over-supplied and demand growth in China is likely to remain muted, given the surplus of steel. However, the point of maximum pain for several producers outside the big three of Vale, Rio Tinto and BHP Billiton, is likely to be reached before the Asian spot price .IO62-CNI=SI can fall below $30 a tonne.
For the rest of this article, click here: http://uk.reuters.com/article/column-russell-commodities-bets-idUKL3N14B37020151224