History points to nickel leading rebound in base metal prices

The past 35 years of price data suggests nickel prices are the closest of all base metals to bottoming out while nickel sees the greatest risk of prices rebound sharply from current levels.

Looking across the main base metal prices the extent of the current down-cycle, only copper and nickel match or exceed previous down-cycles in prices. Both metals, but nickel in particular also have the greatest risk of a significant imminent move up in prices from current depressed levels. In contrast aluminium, tin and zinc have tended to need to fall much further and remain much longer trading at depressed levels than they have so far this time around.

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Forecasting folly: Why forecasts of a rebound in oil prices are prolonging pain

What incentive have US shale operators got to shut production, or the banks that are financing them to pull the plug? Okay, oil prices are hovering about $30 per barrel now, just above operating costs, but if many of the investment banks are to be believed prices are set to rise rise sharply during 2016. Are optimistic forecasts just serving to prolong the period of droopy prices?

The start of the year has seen investment banks tearing up previous forecasts by ~$20 per barrel as the price of oil has sunk during January. But what all (bar one) forecast is a recovery during 2016 and into 2017.

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Watch for flat crude futures curve to signal end of oil bear market

A flattening in in the crude futures curve will be the sign that the decline in crude prices has run its course. That’s according to recent research published from both Goldman Sachs and PIMCO.

But what does that mean? Well, the best indicator of supply and demand is often not the actual spot price but the difference in price between adjacent futures contracts (known as the spread).

Periods of excess supply are normally characterized in futures prices by a “contango” structure. In contango, contracts for deferred delivery trade at a premium to the spot price to compensate the seller for the costs of financing, storing and insuring the product before delivery. And so a narrowing of spreads for both Brent and West Texas Intermediate (WTI) indicate a closer balance between supply and demand.

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