Prices for copper and oil are poised to fall, according to a new report that adds to the growing skepticism around the great commodity revival.
Kevin Norrish, a widely followed analyst with Barclays PLC, warns that raw materials prices could get trampled if the buyers who have piled into the commodity sector during recent weeks decide to simultaneously rush for the exits.
“Investors have been attracted to commodities as one of the best performing assets so far in 2016,” he said. “However, in the absence of any concerted fundamental improvements, these returns are unlikely to be repeated in the second quarter, making commodities vulnerable to a wave of investor liquidation.”
He says oil, now above $38 (U.S.) a barrel, could easily tumble to the low $30s, while copper might swoon from its current level of about $4,945 a tonne into the low $4,000s.
If so, the declines would mark a dramatic reversal of the recent burst of enthusiasm for commodities. Mr. Norrish estimates that more than $20-billion flowed into commodity investor products during January and February, the strongest start to a year since the boom times of 2011.
The frantic buying in the sector since mid-January has fuelled the “biggest commodity comeback ever” after a dismal 2015, according to Jodie Gunzberg, global head of commodities and real assets at S&P Dow Jones Indices.
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