Recently, commodities have “made a lot of noise”, and market participants have different opinions on how long commodity prices will continue to rise.Goldman SachsTheir latest predictions were also given on Monday.
Goldman Sachs emphasized the previous judgment that there is no need to worry about commodities being affected by the Fed's tough stance or the flattening of the yield curve. Earlier, Goldman Sachs anticipated that the US non-farm payroll report for April reduced the possibility that the Federal Reserve would reduce the scale of debt purchases by the fourth quarter of this year, but it is still expected that the FOMC will begin debt reduction early next year.
Commodities, according to Goldman SachsidealsThe scenario is taking shape. There are still opportunities for commodities over the next 12 months:
“The ideal scenario for the commodity asset class appears to be developing on the following foundations, including moderately strengthened US economic growth, the catch-up of global economic growth (with the exception of the US), the easing of pressure on US wages, and the dovish tone of the Federal Reserve.”
This environment “is a sweet spot for commodities. Inflation is starting to rise, and monetary policy will not be tightened for quite some time.” One of the most exaggerated risks of commodities is a rise in long-term US interest rates. Prices of raw materials “will rise further”, and more returns are expected in the next 12 months.
First, let's focus on oil prices. Goldman Sachs said that the baseline forecast for commodity prices includes forecasting that the price of Brent crude oil will rise to 80 US dollars/barrel in the third quarter and the US gas price will rise to 3.25 US dollars/million British heat.
Goldman Sachs expects that the gap in the global oil market (currently around 1 million barrels/day) will begin to widen drastically. OPEC+ is expected to cope with weak demand or higher-than-expected growth in Iranian oil production, thereby maintaining tight oil market fundamentals; furthermore, oil demand is expected to reach 100 million b/d by the end of this year.
Last week, America's largest refined oil pipeline operator was attacked by ransomware. Colonial Pipeline, the largest oil pipeline operator in the US, confirmed that the company's industrial control system was attacked by a cyber attack and involved ransomware. The company learned of the attack on May 7. It has now suspended the operation of the East Coast Fuel Transportation Pipeline, and gasoline and diesel supplies on the east coast of the United States will be affected.
In response, Goldman Sachs said in a report last weekend that the attack on Colonial Pipeline Pipeline showed the fragility of global energy infrastructure in the face of increasingly frequent attacks. While still low demand and above average inventories may limit the impact of such events on consumers in the short term, the attack could be far more disruptive once global energy inventories fall below average later this year. At that time, prices may rise sharply, as predicted by the sharp rise in the prices of timber, steel, and electricity during the winter storm at the beginning of this year.
As for natural gas, Goldman Sachs raised the Dutch Property Transfer Fund (TTF) gas price forecasts for the summer of 2021 and the winter of 2021-22 to $7.80 per million British heat and $8.30/million British heat, respectively. Previously, they were $6.30 per million British heat and $6.60 per million British heat.
The Dutch Property Transfer Fund (TTF) gas price forecasts for the summer of 2022 and the winter of 2022-23 were raised from the previous $6.30/million BPM and $6.90/million BPM to $7.90/million BPM and $9.00/million BPM.
On the metal market side, Goldman Sachs expects nickel prices to reach 18,500 US dollars/ton, 19,500 US dollars/ton, and 21,000 US dollars/ton after 3, 6, and 12 months. The price of copper rose to 11,000 US dollars/ton in 12 months. Silver is a more leveraged bet than gold. Driven by a strong industrial recovery, silver will follow the rise in gold prices. Gold ETF positions are expected to increase in the second half of this year.