Oil to lead a broad-based recovery

Despite the rally in the oil market at the end of January, the big picture over the last few months has of course been one of further sharp falls in the prices of most industrial commodities. What's more, the positive note for oil may yet prove to be a false one, as hopes of a deal between Russia and OPEC to reduce output are likely to come to nothing again. Nonetheless, we continue to expect most prices to rebound by the end of this year, led by oil, as supply cuts gain traction and sentiment towards China improves. This may shift the focus back to the prospect of further interest rate hikes in the US, but global monetary conditions are set to remain supportive of commodity demand and prices for a long time yet. Gold has already weathered the onset of Fed tightening relatively well, although high stocks and bumper harvests will continue to overshadow many agriculturals.