Crude oil prices likely to remain volatile, says OCBC Bank
KUALA LUMPUR: Crude oil prices will likely remain volatile into year-end.
This, said OCBC Bank, is given Russia’s vagueness on plans to trim output, and amid suspense over the Organisation of the Petroleum Exporting Countries ( OPEC) implementation of an output cut in November.
It said the OPEC members had endured low oil prices for far too long, with much damage already done to its fiscal space.
“That alone should coax the cartel to initiate a production cut.
"Global g rowth should accelerate into 2017 and support crude oil demand.
"This will later give the commodity price a welcome boost into 2017,” the bank said in a statement.
As for Malaysia’s palm oil, OCBC said production is likely to contract 13.2 per cent this year, as producers struggle with lower production from the harsh El Nino weather conditions in 2015.
A La Nina phenomenon to occur this year has been downgraded to 40 per cent (down from an earlier 75 per cent), according to the latest official report from the National Oceanic and Atmospheric Administration.
“With weather extremities behind us, prices may rally into end-2016 given seasonally lower production, but subsequently normalise lower into 2017,” it said.
Meanwh i l e, for other commodities like gold, the precious metal has been supported by riskoff sentiments since the start of 2016, led by the US Federal Reserve (Fed) rate hike concerns, slowing Chinese growth, and an unexpected Brexit outcome.
“Our base case scenario is for global growth to accelerate, albeit gradually, into 2017.
“With the US being one of the bright-spots next year, the Fed is expected to raise interest rates by December 2016, and another two more times in 2017.
“Alongside a rosier 2017 global outlook, the higher interest rate environment should underpin a bearish gold outlook next year,” OCBC said. — Bernama