Commodities  

Opec agreement boosts commodity prospects

Opec agreement boosts commodity prospects

Downside risks in commodities have receded following the agreement of Opec nations to lower output, according to NN Investment Partners.

Opec's first cut in supply in eight years has seen the price of oil rally by 15 per cent since last week.

Koen Straetmans, senior strategist for multi-asset at NN IP, said the recovery in global cycle indicators and supportive signals from China’s housing sector were other reasons for being positive on commodities.

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“The Opec deal end November was probably even more bullish than expected," he said. "Moreover non-Opec will contribute another estimated - 600 kbd (thousand barrel per day) cut half of which taken by Russia, to be agreed this weekend.

"With this the oil market is expected to rebalance early next year supporting prices." 

Mr Straetmans said compliance with the deal will determine the upside or not, but his firm have upgraded its position on commodities to an overweight position.

Peter Izard, business development manager at Investec Private Bank, called Opec's decision unsurprising, as the oil price was so uneconomically low for producers, but he noted market volatility meant that investors could still not be certain about oil price rises.