“After updating our outlook, we are left even more convinced of the conclusions we made in January,” said Forgie. “We continue to believe that the medium term fundamentals are improving and that the rally in oil prices is a combination of unexpected production disruptions and markets looking through current oversupply to the much stronger backdrop that should be in place in 2017. The rise in prices is, thus, quite rational and barring a dramatic and unexpected decline in demand, the worst point for oil prices now appears to be behind us.”
“Given the balance of factors, prices for 2016 should meet some resistance at $65, in our view, unless there is an unexpected, severe supply disruption or a new major geopolitical risk develops,” Forgie continued.
The caveat that the Nikko portfolio managers add of ‘barring a decline in demand’ is telling though.
With the picture in China still murky and any number of other geopolitical troubles to point to, betting a significant chunk of your portfolio on a commodities bull run is a bold move.
