NN IP has moved to overweight in WTI Crude Oil and Zinc amid increasing signs of output discipline among producers
Koen Straetmans, senior strategist Multi-Asset, at NN Investment Partners, said: “Currently, nearly all major commodity segments are characterized by excess supply. Increasingly, signs of production discipline are being seen in selected commodities and these are the places where we prefer to go long.
“On this basis we moved WTI crude oil and Zinc to a small overweight.
“The overweight WTI crude oil is intended for the medium term as oil markets are expected to rebalance in the second half of this year. Investors may start to see beyond near-term weakness and take the view that a rebalancing further out is becoming likely.
“Most importantly US oil rigs (including in key shale plays like Bakken, Permian and Eagle Ford) and to a lesser extent US oil production are showing further declines. On an annual basis US oil production growth is now negative. We expect this trend to continue as oil companies continue to aggressively slash capex.
“All in all, we judge a coordinated production discipline initiative between OPEC and non-OPEC or even within OPEC as unlikely. Nevertheless, although unlikely to materialize (or being helpful near-term in market rebalancing) this verbal intervention is supportive for prices or may at least protect on the downside.”