Commodities markets are ever-unpredictable — and things can go down as fast as they go up

Commodities markets are ever-unpredictable — and things can go down as fast as they go up
Photo by freddebackman, Pixbay

Things have finally settled down a little.

At least for me personally, being home for several days of holiday time — following a frenetic travel schedule between North America and Asia over the last three months.

Although news this week in the global resource markets shows that things are far from quiet in petroleum and mining around the world.

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There’s even been big developments in markets like renewable energy. With the government of India officially announcing it has become the world’s fourth-largest wind power producer — after installing 3,423 MW of new capacity over the past fiscal year.

All of which shows that things continue to be exciting — at least in select spots. Despite the fact that 2016 as a whole was a challenging year for project developers.

Gold was obviously a standout over the past 12 months (watch next weekend in Prime Meridians for my regular “Top 5 stories of  the year”, where gold featured prominently during 2016), although even that hot sector has moderated over the last several weeks.

News like the last item above suggests that fortunes could be better for the gold market going into 2017. And there continue to be other bright spots across the resource universe — such as the big surge we saw in LNG prices over the past few weeks.

Moves like that are bringing some life coming back to the global oil and gas business — evidenced by BP’s big buy into West Africa this week. And if oil holds above $50, perhaps the new year will see a rise in project activity (just this week Wood Mackenzie said it sees deepwater drilling activity providing half of all new discoveries over the coming years).

Of course, there’s no guarantee that prices will go the way we want in 2017. Commodities markets are ever-unpredictable — and things can go down as fast as they go up.

There will be some surprise losers this year, just as there will be surprise winners. But, as always, those down markets will provide a chance for savvy and well-financed developers to pick up new projects in an un-crowded marketplace. Often a recipe for big successes down the road.

The same ups and downs are likely to happen on a geographic level as well. Countries like Ecuador and Myanmar seem to be on the rise when it comes to mining and energy activity — while former go-to destinations like British Columbia and Colombia are struggling.

There will almost certainly be more shuffling of political and regulatory affairs over the next 12 months. Maybe the biggest discoveries of the year ahead will come in a place no one is expecting (gold in Japan, perhaps?).

Whatever the case, the basic rules of success for resource developers remain the same: find good people with well-founded ideas, who have the willingness and ability to get their theories tested in the jungles, deserts, or mountaintops where the next big find is lurking.

The more things change, the more they stay the same — which is why there will always be cause for optimism, no matter what segment of the resource world we’re working in. Wishing a great holiday to all the friends and associates in all the corners of the world this week — hope you and yours enjoy a few days of well-deserved rest and good cheer.

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Dave Forest writes Pierce Points Free Daily E-Letter, an advisory on mining and energy read every day by BP, Rio Tinto, JPMorgan, BNP Paribas, Repsol, GDF Suez, GE, Platts, Warburg Pincus, and the UN. Sign up for free at Mr. Forest has funded and managed over $80 million in global exploration and development in natural resources, and continues to design and develop projects globally. He is a professional geologist.
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