Commodities to be mainly range-bound in 2017 - Commerzbank

Analysts at Commerzbank expect commodities to be mainly range-bound in 2017 rather than directionally lower or higher, in particular when considering roll losses in oil.

Key Quotes

“Oil and base metal prices have bottomed out in 2016, as suspected. With the recently announced oil production cuts by the OPEC – assuming the unlikely event of full compliance – the oil market should balance in 2017. But US production is expected to rise in 2017 under the Trump administration and higher oil prices due to the OPEC announcement are likely to fuel this process further. This should limit the upside for oil and combined with continued strong roll losses, investors are not likely to generate positive total returns in 2017 with oil. Reflecting the high oil price volatility we expect a total return in the range -10% to 0%.”

“We are more constructive on base metals although in the short term a more cautious positioning seems justified following the strong recent run. With higher inflation, persisting political uncertainty and given the strong recent decline, gold should have some upside potential in 2017, despite an appreciating US dollar and rising opportunity costs of holding gold. We have pencilled in a total return of between 4% and 8%.”