Investment Research — General Market Conditions
24 July 2015
Commodities Forecast Update
Iran deal, China concerns weigh on commodity prices
Oil: prolonged glut
We expect oil prices to recover over the coming year driven by stronger global growth.
We will likely see the recent weakness extend in the coming one to two months as the
dollar rises ahead of the first Federal Reserve rate hike. Towards the end of the year,
focus will be on the implementation of the Iran nuclear deal – we expect the market to
have already priced in the effect. Geopolitical risk will be a key upside risk factor. We
have cut our oil price forecast reflecting the fact that the Iran nuclear deal will likely
prolong the global oil glut. We now forecast the Brent crude price to average USD69/bbl
in Q4 15 and USD73/bbl in 2016, which implies the following average prices for 2016:
jet fuel USD709/MT; ULSD USD661/MT; 0.1% gasoil USD649/MT and 3.5% fuel oil
USD371/MT.
Metals: awaiting global growth recovery
The Chinese stock market collapse and the decline in oil prices on the back of the Iran
nuclear deal have taken their toll on base metal prices over the past month, on copper and
nickel prices particularly. Weak global growth momentum and a rise in the US dollar
ahead of the Federal Reserve hiking the fed funds rate should continue to weigh on base
metal prices in the coming one to two months. Thereafter, stronger global economic
growth and a recovery in oil prices should lead base metal prices higher. The effect of
stronger demand will likely be more supportive for aluminium and zinc prices, while
being less pronounced on copper and nickel prices, where abundant supplies should limit
the upside potential. We have therefore maintained our forecasts for the LME aluminium
3M and LME zinc 3M prices at USD2,075/MT and USD2,091/MT respectively and
lowered our forecasts for LME copper 3M and LME nickel 3M to USD6,150/MT and
USD16,125/MT respectively.
Grains: Australian wheat at risk from dry El Niño weather
Cold May weather in major wheat-growing areas in Australia, Europe and US may just be
a preview of what could be in store later in the year if the return of El Niño brings
disruptive weather patterns. We have therefore raised our CBOT wheat price forecast for
next year to USD630/MT and our Matiff wheat price forecast to EUR205/MT. Similarly
we have also raised our rapeseed forecast to EUR425/MT. We have kept our forecast for
CBOT soybean unchanged at USD1,031/MT as the soybean market remains well
supplied and growing conditions in the US have been favourable so far this season.
Senior Analyst
Jens Nærvig Pedersen
+45 4512 8061
[email protected]
Important disclosures and certifications are contained from page 3 of this report.
www.danskeresearch.com
Commodities Forecast Update
Forecasts
Danske Bank’s commodity price forecasts
2015
Energy:
front month (US$/bbl)
NYMEX WTI
ICE Brent
2016
AVERAGE
24/07/15
15Q1
15Q2
15Q3
15Q4
16Q1
16Q2
16Q3
16Q4
2014
2015
2016
49
55
49
55
58
63
65
61
64
69
64
69
67
72
70
75
70
75
93
100
59
62
68
73
1,894
6,828
2,165
16,952
1838
5863
2157
14306
2075
6150
2263
16125
Base metals:
LME 3M (US$/t)
Aluminium
Copper
Zinc
Nickel
1,639
5,220
1,961
11,255
Precious Metals:
spot (US$/oz)
Gold
1,084
1,219
1,193
1,100
1,110
1,115
1,120
1,125
1,130
1,266
1156
1123
Agriculturals:
front month
Matif Mill Wheat (€/t)
Rapeseed (€/t)
CBOT Wheat (USd/bushel)
CBOT Corn (USd/bushel)
CBOT Soybeans (USd/bushel)
187
387
522
401
1,006
190
360
523
385
990
182
370
505
367
966
205
410
550
410
1,000
210
410
580
420
1,000
215
410
600
430
1,000
215
425
610
430
1,025
210
425
620
430
1,050
205
425
630
430
1,050
187
354
588
416
1,245
197
388
540
395
989
211
421
615
430
1031
24/07/15
15Q1
15Q2
15Q3
15Q4
16Q1
16Q2
16Q3
16Q4
2014
2015
2016
680
529
506
496
405
272
273
533
567
527
515
404
286
280
665
609
580
570
465
328
325
605
575
550
535
447
305
305
660
665
630
615
506
345
350
645
665
625
615
506
345
350
715
700
655
640
528
365
365
725
735
685
670
550
380
385
670
735
680
670
550
380
385
907
905
854
839
729
553
526
616
604
572
559
456
316
315
689
709
661
649
533
368
371
1,813
1,787
1,800
1,950
2,000
2,050
2,100
2,150
5,808
6,043
5,700
5,900
6,000
6,100
6,200
6,300
2,091
2,188
2,150
2,200
2,225
2,250
2,275
2,300
14,410 13,065 14,250 15,500 15,750 16,000 16,250 16,500
2015
Oil products:
front month (US$/t)
NYMEX gasoline Euro-bob Oxy (USD/MT)
Jet fuel CIF cargo (USD/MT)
ULSD 10ppm CIF NWE cargo (USD/MT)
0.1% Gasoil Barges FOB Rotterdam (USD/MT)
ICE Brent (USD/MT)
1.0% fuel oil FOB NWE cargo
3.5% fuel oil FOB ARA barge (RHS)
2016
AVERAGE
Source: Macrobond Financial and Danske Bank Markets
2|
24 July 2015
www.danskeresearch.com
Commodities Forecast Update
Disclosure
This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske
Bank’). The author of the research report is Jens Nærvig Pedersen, Senior Analyst.
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in the
research report accurately reflect the research analyst’s personal view about the financial instruments and issuers
covered by the research report. Each responsible research analyst further certifies that no part of the compensation
of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed
in the research report.
Regulation
Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject
to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske
Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority
(UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation
Authority are available from Danske Bank on request.
The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’
rules of ethics and the recommendations of the Danish Securities Dealers Association.
Conflicts of interest
Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske
Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed that any
request that might impair the objectivity and independence of research shall be referred to Research Management
and the Compliance Department. Danske Bank’s Research Departments are organised independently from and do
not report to other business areas within Danske Bank.
Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes
investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate
finance or debt capital transactions.
Financial models and/or methodology used in this research report
Calculations and presentations in this research report are based on standard econometric tools and methodology
as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be
obtained from the authors on request.
Risk warning
Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis
of relevant assumptions, are stated throughout the text.
Date of first publication
See the front page of this research report for the date of first publication.
General disclaimer
This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for
informational purposes only. It does not constitute or form part of, and shall under no circumstances be
considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments
(i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or
options, warrants, rights or other interests with respect to any such financial instruments) (‘Relevant Financial
Instruments’).
The research report has been prepared independently and solely on the basis of publicly available information that
Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not
untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates
and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation
any loss of profits, arising from reliance on this research report.
The opinions expressed herein are the opinions of the research analysts responsible for the research report and
reflect their judgement as of the date hereof. These opinions are subject to change, and Danske Bank does not
undertake to notify any recipient of this research report of any such change nor of any other changes related to the
information provided in this research report.
3|
24 July 2015
www.danskeresearch.com
Commodities Forecast Update
This research report is not intended for retail customers in the United Kingdom or the United States.
This research report is protected by copyright and is intended solely for the designated addressee. It may not be
reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank’s prior
written consent.
4|
24 July 2015
www.danskeresearch.com