Global commodity prices including oil and gold are almost assured of a better finish this year too, according to Standard & Poor. Analysts with Standard & Poor's Equity Research said there are largely positive signs for both the energy and materials sectors in 2011.
For 2011, Standard & Poor's Equity Research Services (ERS) predicts that the bull run in gold will continue. But it expects that the metal will "consolidate in a sideways pattern" for part of the year following 2010's 30% gain.
"In our view, some backing and filling is normal in an ongoing bull market and we look for gold to finish 2011 at the $1,600 level, up from $1,421 per ounce at the end of 2010. We believe the fundamentals for the market will remain the same, with the threat of sovereign debt defaults and general currency instability increasing the appeal for gold as an alternative monetary asset. Also, a possible upside acceleration in commodity prices in 2011 could add to the demand for gold as a hedge against falling currencies," according to the research company.
Moving beyond gold, for 2011, ERS looks for rising prices and volumes for base metals and minerals on the expectation for continued growth in the global economy and tight supply for such commodities as copper and iron ore. However, ERS cautioned that its positive outlook is "tempered somewhat by concerns that growing imbalances in China's property markets could lead to less vibrant demand for base metals used for construction. As ERS sees it, what appears to be excessive construction of both commercial and residential buildings along with high ratios of property prices to rents could lead to reduced demand and lower prices for base metals and minerals."
In the energy sector, the analyst company sees continued outperformance by crude oil relative to natural gas. However, the current rig count of deepwater floaters in the US Gulf of Mexico (32, not including three newbuilds due for delivery in the second half of the year) is expected by ERS to drop by as many as eight units as operators lose patience with the slow pace of permit issuance in the region.
ERS also forecasts consolidation in the oil and gas markets. "While ERS thinks natural gas remains a solid long-term play, short-term natural gas prospects continue to look weak given depressed prices, putting pressure on smaller players that lack access to the currently more promising liquids-rich plays. ERS thinks this will spur more natural gas acreage deals in a buyer's market We see the integrateds increasing production of natural gas by 10% in 2011, fuelled by acquisitions, compared to just 1% growth in liquids production," it stated.