The IEA World Energy Outlook 2012 was clearly bullish on future US supply from “tight oil” deposits.
Despite several downgrades, the IEA still expects persistent strong global oil demand and continued substantial growth going forward, ensuring a relatively tight market balance.
Meanwhile the geopolitical temperature in the Middle East continues to rise, with the current Israeli-Palestinian conflict the latest example. Geopolitical upside risk remains high.
As expected, the post-summer rally in industrial metals prices was short-lived, with Chinese economic headwinds and political uncertainty hardly supportive.
SEB’s expert’s opportunistic tactical recommendation to sell on rallies and buy near the bottom of the range (to some extent set by marginal production costs) remains.
Their strategic view is mildly bullish as a modest acceleration in global growth still appears the most probable scenario for next year, with China’s new political leaders likely to promote stability.
Positive factors still dominate the gold market. However, due to the metal’s surprisingly poor performance following the third-quarter announcement SEB revises its fourth-quarter 2012 average price forecast down 50 dollars/ozt to 1,750 dollars/ozt.
Gold and silver coin sales are showing signs of recovery, while physical ETF sales remain strong, suggesting the retail market is becoming increasingly concerned at the rate at which money is being printed.
El Niño risk this winter has decreased further with neutral conditions currently the most likely scenario, reducing meteorological risks going forward.
The knot in the grain market is slowly beginning to unravel though potential FSU protectionism, low inventories during the intercrop season and local drought conditions remain at least short-term supportive. Still, risk is skewed to the downside and SEB’s long term forecast outright bearish.
US winter precipitation will be very important given current dry conditions in the Midwest and Great Plains.