MUFG tactically cautious but structurally bullish on oil in 2023

MUFG Global Markets Research has forecast Brent breaking north of $100/barrel again by the summer and averaging $101/barrel this year.


“We are tactically cautious but structurally bullish on oil in 2023 and believe that the supply-side which is not in good shape will begin to bite in H2 2022 as demand angst moves into the rear-view mirror,” MUFG said. 


Meanwhile, the combination of exceptionally warm realised and forecast weather and strong energy conservation has driven a further softening of 2023 European gas balances, sending TTF prices below pre-war in Ukraine levels.


Commodity markets

Meanwhile, commodity markets face the most macro uncertainty since the onset of Covid in spring 2020 – from balancing Europe heading into recession, the Fed trying to soft land the US economy and China inching towards reopening.


With the US dollar too dominant to get long, but fundamentals too tight to get short, the bearish macro outlook will likely spur volatility across the commodities complex for most of H1 2023. However, with China reopening, the eventual end of rate hikes and a US dollar peak all likely by the summer, these improving fundamentals alongside prevailing supply scarcity, is set to turn into a meaningful tailwind for commodities in H2 2023.


Beyond these cyclical drivers, the structural challenges facing commodities – that pre-date both the war in Ukraine and Covid – remain unresolved.


Macro headwinds

Deglobalisation, decarbonisation, the structural rise in demand induced by government policies around redistribution and the near-decade of underinvestments in carbon-intensive capex with supply scarcity

inadequate to meet today’s policy-induced demand – all principles of the supercycle commodities thesis  – set to move top of mind as soon as the current macro headwinds are in the rear-view mirror.


“More amply, our conviction remains that, whilst not transpiring in a linear fashion and rather in a sequence of price spikes, the supply constrained commodities supercycle will be a decade long – 3 years to generate track record, 3 years of spending to generate cost inflation and 3-4 years of investment to generate supply.”


Base metals

Base metals – aluminium, copper, nickel and zinc – prices are rallying thus far in 2023 as fast shifts in the fundamental and technical outlook have offered a more favourable backdrop. What’s more, the most recent People’s Bank of China (PBoC) meeting hinted at further demand-side property easing ahead – a sector which has been a key headwind to base metals consumption trends over the past year.


Precious metals

Having spent 2022 torn between a boost from elevated recession risks and a drag from monetary tightening, gold and silver have started 2023 in solid shape on waning Fed bets, a weaker US dollar and robust physical demand. Meanwhile, for core PGMs – gains in gold and Fed downshift wagers, is propelling platinum higher, but palladium remain increasingly oversold.


Bulk commodities

Iron ore’s (too rich) rally continues with prices climbing north of $120/MT on optimism over demand from China’s beleaguered property sector. Meanwhile, coal prices are plunging as warm winter conditions ease demand, supporting major importers notably in Asia.



Grain prices – corn, soybean and wheat – have started the year a leg lower, as fertiliser prices retreat owing to plunging natural gas prices, bringing relief to farmers and, in-turn lowering food price inflation.

— TradeArabia News Service