Natural gas seen bullish in H2: Barclays
LONDON, January 5, 2017
Natural gas prices are likely to rise in the second half 2017,while copper and iron ore are broadly at fair value, said a commodity research report from Barclays, a British multinational banking and financial services company.
“From Brexit to Trump’s election, polling models and analysts were frequently surprised in 2016 by political events that had seemed remote. As the new year begins, certain indices show investors anticipate more tail risks in 2017, with geopolitical concerns,” the report said.
“We define a commodity ‘black swan’ as an extreme event or dynamic that market participants, including ourselves, are not currently pricing in.
We assess several black swan threats to the supply, demand, and transit of commodities that could potentially move markets in 2017. Our analysis illustrates an important point: politics are likely to matter just as much as economics,” Barclays said.
In particular, the new politics of populism and protectionist trade policies have the potential to disrupt global supply and demand assumptions for various commodities.
Investors will have to balance the risks of unforeseen macroeconomic shocks and their effect on demand (bearish price) with potential geopolitical shocks disrupting the supply side of the market (bullish price), according to Barclays.
A tightening commodity inventory picture, especially in oil, will likely exacerbate how the market prices supply risks even if no physical supply disruption occurs.
“Generally, we see risks skewed to the upside in 2017, based on a high likelihood of disruption risk. We see demand side events as being less likely, but having more impactful structural impacts on the market compared to the supply side. Watch these spaces: China, Russia, the Middle East and Turkey are likely to surprise the commodity complex in 2017,” Barclays said in the report. – TradeArabia News Service