ABN AMRO: Stronger Brent Price to Improve Commodities Outlook
by Jon Mainwaring
Wednesday, January 25, 2012
ABN AMRO reported Wednesday that it expects a strong Brent crude oil price this year to help improve the outlook for commodities in general.
The Dutch bank said it upgraded its view of commodities to 'neutral' in its Quarterly Commodity Outlook report, published Wednesday, because of evidence of a return to fundamental pricing in a range of categories, and the likely impact of a strengthening Brent oil price. This move reversed the downgrading of the commodities asset class to 'negative' last September.
Despite a narrowing of their spread in previous months, the bank predicts structural divergence in West Texas Intermediate and Brent, with WTI driven by U.S. domestic factors and Brent's greater exposure to geopolitical risks. It also sees rebalancing of major commodity indices favoring Brent.
"WTI is isolated from developments in non-OECD [Organisation for Economic Co-operation and Development] oil markets and increasingly driven by factors affecting US oil production. It has become a less reliable marker for conditions in global oil markets,” said Tim Boon von Ochssée, an energy economist at ABN AMRO.
ABN AMRO sees natural gas, which is already at a decade low, under continued pressure from accelerating unconventional gas output and unseasonably warm weather in key markets – before prices rise in the second half.
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