Therefore, we have a neutral stance on broad commodities. But we maintain our preference for oil and energy equities as supply-side challenges are likely to have a bigger impact in the coming months than slowing demand. We still see higher oil prices in the months ahead.


Despite the recent rally, gains in commodity prices have halved amid recession fears.


  • Year-to-date gains for the Bloomberg Commodity Index have shrunk to just over 18% from as much as 38% as recession fears overtake supply concerns.
  • Brent oil prices have slid back to levels before the war in Ukraine on mounting concerns that aggressive rate hikes will hurt global energy demand.

But supply-side challenges in energy will likely outweigh any demand slowdown in the coming months.


  • OPEC+ is cutting output by 2mbpd from November. Though some are already producing below quota, Saudi Arabia has estimated the actual cut could be around 1–1.1mbpd, which is still significant.
  • OECD strategic oil reserves sales are due to end in 4Q, and countries may start refilling tanks. Meanwhile, Europe will ban Russian oil imports by the year-end.
  • In Europe, elevated gas and coal prices are spurring a switch to oil for power generation. Global oil demand is also holding up, and we see it rising by 1.9mbpd.

So, we are still most preferred on oil and energy equities.


  • Although we have reduced our oil forecasts due to growth headwinds, we still see prices rising to USD 110/bbl in March, June, and September 2023.
  • We are neutral on broad commodities. We believe investors should hold their existing exposure rather than add more broad exposure, and be more active and selective within the asset class.

Did you know?


  • The EU is set to cut imports of Russian waterborne crude by 5 December and refined products by 5 February.
  • Oil demand in the US, the world's largest consumer, hit the highest level since 2006 in June.
  • Demand in India, the third largest consumer, is growing the fastest among major economies.

Investment view


Oil prices are likely to remain supported by tight supply due to a cut in OPEC+ production, an end to OECD strategic reserves sales, a switch to oil to generate electricity, and the EU's ban on Russian oil imports by the year-end. We maintain our preference for oil and energy stocks.


Main contributors - Patricia Lui, Giovanni Staunovo, Wayne Gordon


Content is a product of the Chief Investment Office (CIO).


Original report - Can energy still outperform, 14 November 2022.