The commodity market environment has deteriorated markedly in early 2016 and Barclays has decided to reduce oil and copper forecasts as a result. "Recent price declines for major commodities are now greater than in any crisis of the past 30 years and speculative positioning much more negative than it was even in the depths of the financial crisis", explained Barclays analysts in a report titled "New Year, New Woes". That suggests that although the price outlook is weaker than it was previously, the road ahead could be a very bumpy one.
Oil market and price weakness
Although Barclays analysts still expect higher oil prices over the second half of 2016, they see prices moving up from a lower base than we previously envisaged and on a much shallower gradient. They now expect Brent and Wti to both average $37 per barrel in 2016, down from our previous forecasts of $60 and $56, respectively.
In copper, Barclays has revised forecast down to an annual average of $4,350/t from $5,625/t previously. "Prices are likely to remain around spot and slightly strengthen in secondo quater, but thereafter decline in anticipation of a large fourth quater surplus, similar to price behaviour last year", said Barclays.
IEA: oil market report for january
“Exceptionally” mild temperatures in the early part of the winter in Japan, Europe and the US, coupled with weak economic sentiment in China, Brazil, Russia and other commodity-dependent economies, saw global oil demand growth flip from a near five-year high in the third quarter of 2015, at 2.1-million barrels a day, to a one-year low in the fourth quarter of one-million barrels a day, the International Energy Agency (IEA) Oil Market Report (OMR) for January has indicated. IEA added that "persistent oversupply, bloated inventories and a slew of negative economic news pressured oil prices to 12-year lows in mid-January, with demand growth likely to moderate to 1.2-million barrels a day".
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