SocGen plumps for energy medium term despite high metals prices
Singapore (Platts)--25Nov2010/802 am EST/1302 GMT
Despite copper and precious metals such as gold, silver and palladium
seeing a spike in prices, French bank Societe Generale would still put its
money on energy -- NYMEX WTI, Newcastle coal and German power.
This was the message sent out by Frederic Lasserre, SocGen's Global Head
of Commodities Research, at a panel discussion earlier this week.
Energy was expected to overtake precious metals in price performance in
five years' time, making this "our favorite group of commodities," he said.
Talking about the economic challenges and opportunities facing the Asia
Pacific region, and the future outlook for commodities in 2011, Lasserre said
SocGen would "like to be overweight on precious metals."
He was bullish on palladium because of demand growth from emerging
markets, where more gasoline vehicles are being sold than diesel ones "with
Chinese light vehicle sales alone now exceeding those in the EU [European
Union], a traditional diesel market. This is important because palladium is a
key metal for gasoline auto-catalysts."
But, in the medium term, he expects risk and fear in the market to wane,
driving metals prices down and allowing energy to take the top spot in price
performance, he added.
By 2015, Lasserre sees coal FOB Newcastle to rise 63%, German power by
51% and NYMEX WTI by 45% from 2010 prices.
He pinned his hopes to fundamentals regaining a more prominent role in
about five years, just as it did until 2008.
"We expected inventories to trend lower much faster than they are doing
today, and [subsequently for] the forward curve to shift from contango, to [a
flat structure], and then to backwardation. This is taking more time than we
expected six months ago," he said.
He sees oil as being more sensitive to liquidity injections by central
banks than most other commodities. And more monetary easing measures were
likely to push up prices in the future, Lasserre said.
"Globally speaking, energy is very sensitive to liquidity injection,"
Lasserre said, because of the effect it has on the US dollar. "We expect that
this liquidity effect is just at the very beginning ... and hence we should
see some positive stimulus [to oil prices] coming from the central banks down
--Royston Huan, firstname.lastname@example.org
Similar stories appear in Metals Week.
See more information at http://www.platts.com/Products/metalsweek