Commodity Strategy - BMI Vs Consensus: Turning Below Consensus On Oil Prices - AUG 2017

Although the outlook for commodity prices compared with spot prices over the rest of 2017 is neutral, most of our price forecasts for 2017 remain for higher prices on an annual average basis. We are positive on grains and oil from spot levels in H217; neutral to slightly bearish on industrial metals; and negative on softs agricultural commodities and coal. As a result, we remain below consensus on most industrial metals and above consensus on grains and gold ( for more details on these views, see ' BMI Vs Consensus: Above Consensus Gold And Grains ' , June 13). The outlook for some commodities is more positive looking into 2018, including agricultural commodities, non-ferrous metals and gold and we expect them to grind higher ( see 'Commodities Mid-Year Update: Key Themes For 2017', July 4).

Lower Oil Price Forecasts Puts Us Below Consensus - We have revised down our price forecasts for 2017 and 2018 for Brent and WTI, as OPEC cuts have been slower to take effect than we had anticipated and demand has disappointed in the YTD. We now forecast Brent oil to average USD54.0/bbl in 2017 and USD55.0/bbl in 2018, which places us below Bloomberg consensus for both years. Until now, we had held an above consensus view on oil prices. Although we remain bullish on prices in H217, we are less positive towards 2018 and see little room for y-o-y price growth. A key factor capping prices will be the gradual return of cut OPEC and non-OPEC barrels to market, likely from Q218 ( see ' Brent: Surplus Shifting To 2018 Blunts Price Growth ' , July 3).

Bullish Grains View Playing Out, Consensus Is Coming Our Way - Grain prices have performed well so far this year, in line with our long-held view. Rice and wheat are in fact the two best performing commodities year-to-date out of the commodities that we forecast. Bloomberg consensus grain price forecasts have been increasing in recent months, coming closer to our price forecasts, but we still remain above market expectations at this point. We continue to hold production forecasts that fall below official forecasts and thus we expect prices to head higher in the coming quarters.

BMI Bloomberg Consensus Consensus Last Month
Valid as of July 6 2017. Source: Bloomberg, BMI
Aluminium, USD/tonne 1,750.0 1,848.3 1,801.3
Cocoa, GBP/tonne 1,550.0 1,577.3 1,625.0
Coffee, USc/bl 135.0 145.0 149.5
Copper, USD/tonne 5,500.0 5,735.1 5,725.5
Corn, USc/bushel 380.0 371.9 370.0
Cotton, USc/lb 73.0 73.0 73.5
Gold, USD/oz 1,250.0 1,240.6 1,243.0
Iron Ore, USD/tonne 65.0 65.3 67.5
Lead, USD/tonne 2,150.0 2,205.0 2,210.0
Nickel, USD/tonne 10,250.0 10,064.9 10,500.0
Oil - Brent crude, USD/bbl 54.0 54.7 55.7
Oil - WTI, USD/bbl 51.0 53.0 53.9
Soy, USc/bushel 985.0 972.8 987.5
Sugar, USc/lb 18.0 17.7 18.0
Tin, USD/tonne 19,500.0 20,175.0 20,400.0
Wheat/USc/bushel 475.0 450.0 440.0
Zinc, USD/tonne 2,700.0 2,665.3 2,702.6