Commodities

Crude oil is testing 3-month lows even as war rages in the Middle East and the risks of contagion remain very real, i.e. the path of least resistance is down. Central banks don’t always get what they want, but this time, we feel they will, with lower oil prices helping reduce inflation into 2024 – good news for interest rate-sensitive sectors such as real estate.

• We can see crude oil trading under $US80 into Christmas as the commodity ignores theoretically bullish tailwinds.

Copper edged higher last week after testing $US3.50 in late October, and the move helped related stocks rally strongly. e.g. Sandfire (SFR) has already bounced +11.8%. The China recovery story is slowly gaining traction, with iron ore already making headlines; coppers bounce has been relatively muted so far, although stocks have catapulted back into favour – we can see the industrial metal surprising on the upside, especially after its ~19% correction through 2023.

• We remain bullish toward China and copper in the medium term, and a challenge of $US4.00 looks like a possibility into 2024.