Goldman sees bullish signs in sharp destocking in commodities
Goldman Sachs said commodity inventories, from grains to oil, are declining faster than ever as investors cash-in on physical and financial hedges, setting markets up for a sharp rise later this year if major economies avert a recession.
The bank forecast returns of 30.3% on commodities over a 12-month horizon, on the S&P GSCI Commodity Index.
“Bulls, like ourselves, find comfort in the fact that end-use demand across the commodity complex has not shown recessionary signs and investment in supply remains elusive,” Goldman Sachs analysts said in a note.
Recessionary concerns, higher rates and healing of global goods supply chains have led to a broad de-stocking of wholesale goods and inputs, the bank said.
Goldman expects strong oil demand growth into the end of this year as 70% of demand is tied to the service sector in both the west and China where there is still plenty of room to rise back to trend.
However it flagged that oil could stay under pressure as Russian supply has not been cut much despite sanctions and a price cap imposed by the Group of Seven nations, the European Union and Australia.
“Despite weak manufacturing-related demand, overall demand and inventory data across the commodity complex support our more bullish view. Yet, prices continue to move against our forecasts,” it said.