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Commodities – Staying Positive for the 4th Quarter

  • Oil: Citi analysts are bullish crude oil in the short- to medium-term and look for US$50/bbl by year-end and US$60/bbl in 2021 in their base-case as the world looks to be in a prolonged period of curtailed supply and demand, driving lower inventories and higher prices. However, other risks remain to the market, including geopolitical and other disruption risks, combined with COVID-19 demand risks. The US election could also have wider impacts on the US oil sector in the medium term, as a Biden presidency may likely mean more stringent environmental regulations.




  • Gold: Citi analysts remain bullish gold tactically in the short-term and structurally over the medium-term, expecting gold bullion prices to average a record US$2,275/oz as a base case in 2021 and fresh price records to be hit before end of 2020. Gold markets are still in the middle of a secular bull cycle that began in 4Q 2018. While nominal gold prices have posted fresh records above US$2,000/oz in 3Q 2020 and have consolidated in an elevated trading range, inflation-adjusted prices remain ~30% below the 1980 peaks.


  • Bulks and metals: Bulk commodity prices have diverged between rising iron ore and falling coal prices this year but this trend may reverse over the next one to three years as iron ore and coal markets rebalance. Iron ore prices are expected to stay in the US$100-120/t range for the rest of 2020 (averaging US$100/t for 2020). Hard coking coal prices have bounced US$25/t off the lows to US$134/t as of mid-September and Citi analysts think a further rally in prices to US$140/t over coming weeks may be possible. Looking into 2021, coking coal prices could average around US$140/t. Copper prices may trade in a US$6,500-$7,200/t range over coming three to four months, with a likely jump in late October / early November before drifting into the winter. LME aluminium has traded in a narrow range so far in September, but Citi analysts are bullish for the next two to three years, expecting prices to rise to US$1,900/t and US$2,000/t in 2021 and 2022 respectively, based on a constructive macro backdrop and an eventual capacity limit in China being reached.

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