The recent boom in commodities is expected to continue for some time, driven by strengthening demand and rising geopolitical risk premiums, a Deutsche Bank analyst said yesterday.
Amanda Lee (李珮珊), commodities strategist and vice president of research at Deutsche Bank AG London, attributed the bullishness to factors such as the emergence of China and India as commodity super-consumers, as well as underinvestment in production capacity, which raises the risk of a supply bottleneck.
She also cited a weakening US dollar, which encourages demand for geopolitical risk premiums, as a factor in the recent growth of commodity prices.
As for crude oil, prices may hit US$100 per barrel, Lee said, although it would be short-lived if Iran retaliates against possible sanctions over its nuclear program.
A potential drop in Iran's daily export of 2.5 million barrels of oil would not be easily offset, she said.
Grains are another star commodity -- especially corn -- on expectations that China could become a net importer over the next 18 months, Lee said. The US may also redirect corn exports to domestic consumption and turn to corn ethanol as a substitute source of energy, she said.
Corn, along with coffee, sugar and cocoa, are the most undervalued commodities in the agricultural sphere, with upside potential of up to 235 percent, she added.