Citi Makes a Clarion Call for Commodity Bulls With 2017 View – by Ranjeetha Pakiam (Bloomberg News – December 5, 2016)

Citigroup Inc. has given a clarion call for commodity bulls, predicting that most raw materials are expected to perform strongly next year as global economic growth picks up, the oversupply that’s dogged markets finally dissipates and investors plow in more funds.

The bank is bullish on oil, copper, zinc, and wheat on a six to 12-month horizon, with global growth seen at 2.7 percent from 2.5 percent in 2016, according to an e-mailed report. It’s bearish on coal and iron ore — describing this year’s out-performance in bulks as a fluke — and gold and soybeans.

Commodities have made a comeback this year after sinking to a quarter-century low in January as the oil market shows signs of rebalancing after a glut, and base metals rally on prospects for rising demand.

Citigroup has flagged its optimism about raw materials in 2017 since at least July, and other banks have also turned more positive. Last month, Goldman Sachs Group Inc. recommended an overweight position for the first time in four years.

“For commodities in general, the oversupply that was induced by high prices in the first decade of this century are finally being balanced,” analysts led by Ed Morse wrote in the note. “What’s more, the cost structures across commodities are reaching an end of a period of persistent and record deflation.”

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