Oil, metals post stellar 2016 gains on output cuts, demand hopes

Fri Dec 30, 2016 6:47am EST
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By Naveen Thukral and Mark Tay

SINGAPORE (Reuters) - Crude oil, rubber and metals are set to end 2016 with strong gains, bouncing back from several years of losses on output cuts and expectations of firmer demand.

Benchmark zinc CMZN3, steel rebar SRBcv1 and rubber JRUc6 have all rallied around 60 percent this year, while Brent crude LCOc1 has climbed more than 50 percent.

Crude oil output cuts announced by OPEC, stronger-than-expected demand in top commodities market China and expectations of higher infrastructure spending in the United States after the victory of Republican candidate Donald Trump all boosted prices.

Looking forward, oil should gradually rise toward $60 a barrel by end-2017, a Reuters survey found, but gains could be capped by a strong dollar, rising U.S. exports and a possibility that some OPEC members adhere to agreed cuts.

"Accelerating non-OPEC (production) declines and OPEC's decision to cut were key to the rise in 2016," Energy Aspects analyst Nevyn Nah said, while robust demand growth also helped support prices.

"But the rebalancing process is still in its infancy and speculators want to position for that."

TOCOM rubber saw its biggest gain since 2009, a rally driven by higher oil and a weaker Japanese currency, which makes yen-denominated commodities cheaper for holders of other currencies.

Prices for steel rebar, used in construction, have soared more than 60 percent this year on better-than-expected spending on building and infrastructure and soaring costs for coking coal due to government-enforced coal mine closures.   Continued...

A worker walks past oil pipes at a refinery in Wuhan, Hubei province March 23, 2012. REUTERS/Stringer/File Photo