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Reflections from IP Week in London —

The atmosphere was far more upbeat at this year's International Petroleum Week, given the sharp oil price increase since the previous IP gathering, with levels now considered healthy for the industry. Expectations are divided between three views: 1) the market will continue to trend toward USD 65 per barrel, which is the long-term cost trend and also the acquisition policy of many companies; 2) fall back to the marginal cost of production at USD 50, balancing around inventory held; or 3) hover between the two depending on the strength of one's belief in the first two views. Few believe in oil breaking out of this price range in the short to medium term, so OPEC has clearly given the industry some time to breathe. However, the short-lived price recovery is already in danger as OPEC and Russia fail to deliver on agreed cuts and as US shale oil roars back to life.

Martin Jansson, Strategist |

Trading Strategy — Lift of Indonesia ban – game changer for stainless

On Wednesday, January 11, Indonesia announced that it would state a change in its policy on ore exports later in the week. This led to a 4% drop in the nickel price at the end of trading on that day. Then, on Thursday, January 12, Indonesia announced that it is lifting its ban on ore exports. In Thursday's trading, the nickel price pared its losses at 5% but then rebounded later and closed unchanged from the January 11 price. The opening of Indonesian ore exports is set to have longer-term effects on nickel prices and the stainless steel industry.

Martin Jansson, Strategist |

Årskrönika 2016 — Guld, rökelse och myrra

- Lyckosamt år för råvaruinvesterare
- Guldregn i Peking
- Rökelse från Wien
- Myrra i Washington

Martin Jansson, Strategist |

2016 Annual Review — Gold, frankincense and myrrh

- Good year for commodities investors
- It's raining gold in Beijing
- Frankincense from Vienna
- Myrrh in Washington

Martin Jansson, Strategist |

Commodity Bulletin — The Holy Trinity for 2017?

China, Trump and OPEC
In 2016, three strong driving forces have emerged and pushed up commodities to the best asset class, with the index up by 30% in USD terms. For 2017, we be-lieve that only one of these will be able to exceed ex-pectations, and that is not Trump or China, but OPEC.

OPEC exceeded expectations
The bi-annual OPEC meeting in Vienna was a show of strength from the slumbering cartel. A package com-prising three strong components was presented: pro-duction quotas for each member country, a produc-tion ceiling for Iran and an agreement with non-OPEC producers, with Russia accounting for the largest re-duction. The market doubts its implementation; histor-ically OPEC has delivered about 80% of its agreed production cuts. On this occasion, we have confi-dence in OPEC and envisage a good equilibrium in the oil market during the second half of the year. This will lead to an average oil price of USD 60 for 2017, a significant increase from the previous forecast of USD 40.

China + Trump = base metals
The recovery seen by China this year originated in the focused stimulus measures toward the property mar-ket and infrastructure in 2015 - a tried-and-tested method that consumes a lot of industrial metals. China is now taking steps to cool the property market and this will lead to lower growth rates in investments and infrastructure in 2017. Trump's inauguration as Presi-dent will probably increase expectations still further during Q1, but there is then a risk of disappointment both in the US and China. Zinc and nickel are well placed in the supply side of the price equation, while copper and aluminium will be weighed down by high production. Compared with 2016, we see higher prices for all base metals in 2017 but consider the spot pric-es to be too high for all metals except nickel.

Martin Jansson, Strategist |

Råvaruplanket — Den heliga treenigheten för 2017?

Kina, Trump och OPEC
Under 2016 har tre starka drivkrafter utkristalliserats och drivit råvaror till bästa tillgångsslag med råvaruindex upp 30% i USD. För 2017 tror vi bara en mäktar med att överträffa förväntansbilden, det är inte Trump eller Kina - utan OPEC.

OPEC överträffade förväntningarna
Det halvårsvisa OPEC-mötet i Wien gav ett styrkebe-sked från den slumrande kartellen. Ett paket med tre starka komponenter presenterades; produktionskvoter för varje medlemsland, tak för Iran och ett avtal med icke-OPEC, där Ryssland står för största sänkningen. Marknaden tvivlar på implementeringen, historiskt har OPEC levererat 80% av avtalade sänkningar. Vi tror på OPEC den här gången och ser en oljemarknad i god balans under andra halvåret vilket leder till ett snitt-oljepris på USD 60 för 2017, en kraftig höjning från tidigare prognos på USD 40.

Kina +Trump = basmetaller
Kinas återhämtning det här året kommer från riktade stimulanser mot fastighetsmarknaden och infrastruktur under 2015. En gammal, välbeprövad metod som konsumerar mycket industriella metaller. Kina har nu börjat kyla ner fastighetsmarknaden vilket kommer att vara ledande för lägre tillväxttakt i investeringar i infra-struktur under 2017. Trumps tillträde som president kommer sannolikt öka förväntningarna ytterligare under Q1 men sedan finns det risk för besvikelse både i USA och Kina. Zink och nickel står starka i utbudssidan av prisekvationen medan koppar och aluminium kommer tyngas av hög produktion. Vi tror på ett högre medelpriser för alla basmetaller under 2017 jämfört med 16 men ser spotpriserna som väl höga för alla utom nickel.

Martin Jansson, Strategist |