* Nickel forecast at $14,750 tonne in Q1; vs $13,955 now
* Brent seen averaging $101 a barrel in Q1 vs about $110 now
* Gold seen at $1,350 an ounce in Q1 and $1,270 by Q4 2014
By Barani Krishnan
NEW YORK, Dec 9 Base metals, led by nickel,
appear set to trend higher in 2014 due to tighter supplies,
while unfavorable economics should keep pressure on gold and oil
and prompt investors to avoid much of the commodity complex,
Barclays said on Monday.
In another negative outlook on commodities from a major
investment bank, London-based Barclays PLC said that
outflow of money from the sector will not end soon, at least not
in the first quarter.
It cited a litany of reasons, including comfortable supply
levels in most raw materials; a still-sluggish global economy
and the likely scaling back of the Federal Reserve's stimulus
that had supported commodities.
"It is unlikely investors will warm to commodities in the
near term," said Barclays, which until a few years ago was one
of the biggest proponents of the sector. Goldman Sachs,
often regarded Wall Street's most authoritative voice on
commodities, and Citigroup have issued similarly sanguine
outlooks in recent weeks.
NICKEL MOST FAVORED PLAY
Smaller stockpiles has base metals better positioned for
gains than other commodities when the new year begins, with
nickel in particular due to a planned export ban by Indonesia,
"Most base metals have been stuck in structural surplus to a
greater or lesser degree since 2007/08 after what was one of the
strongest-ever periods of supply growth. However, 2014 is likely
to mark the end of this phase."
Nickel hit a one-month high on the London Metal
Exchange on Monday, closing up 1.4 percent at $13,955 a tonne.
Barclays said it expects the metal to average $14,750 in the
first quarter and above $15,000 for the rest of the year as the
Indonesian ban potentially deprives the Chinese nickel-pig iron
sector of crucial raw material.
"There remains some uncertainty over how strictly this ban
will be implemented. Even if it is not, nickel prices are so
low," it said. Nickel is down 18 percent so far this year.
Barclays said it expected aluminum and lead supplies to turn
into a deficit in 2014, and zinc's surplus inventories to shrink
dramatically like nickel's. It forecast modest supply growth in
copper, the most-widely traded base metal.
OPEC SUPPLY WEIGHS ON OIL
In crude oil, it said the need for OPEC oil was diminishing
and global inventories will climb if members of the producer
group do not cut output. A sluggish global economy weighed on
the outlook for oil, as did a decline in geopolitical risks in
oil production areas following the nuclear agreement between
Tehran and the global powers, it said.
Barclays projected oil's benchmark Brent crude to
average $101 per barrel in the first quarter, versus Monday's
level of nearly $110. It forecast a high of $108 for the final
quarter of 2014. Brent is down almost 2 percent this year.
For U.S. crude, the projection was $95 a barrel in
the first quarter, versus current prices near $98, and a high of
$99 by the year-end. U.S. crude is up about 6 percent this year,
In the case of gold, Barclays advised investors to "short",
or bet on a fall in prices, the precious metal after March, its
target period for any reduction in the Fed stimulus.
In spite of that, the bank had a higher price expectation
for gold in 2014 versus Monday's traded levels -- a discrepancy
it did not explain.
Barclays said gold was likely to average $1,350 an ounce in
the first quarter, although it forecast a drop to $1,270 by the
end of 2014. The spot price of gold hovered at $1,240 on
Monday, down 26 percent so far this year and heading for its
first yearly loss since 2000.
Barclays did not provide price forecasts for the
agricultural markets or "softs" commodities such as coffee,
sugar, coffee and cocoa. But it cited supply gains in corn and
wheat from larger harvests in 2013/2014.