Natural Gas

China’s appetite for liquefied natural gas (LNG) is set to rise this year, spurred on by collapsing international LNG prices and a moderate recovery in domestic demand. Global LNG prices will face upward pressure on recovering worldwide demand and a limited supply increase in the second half of the year. We expect LNG prices in China and globally to be 20-30% higher than current levels by the end of this year.

Stay defensive in the second quarter. We can see a narrow window for risky assets to outperform but we recommend investors stay wary amid high rates, supply risks, extreme uncertainty, peak polarization, and structurally rising geopolitical risk.

The risk-on rally is challenging our annual forecast so we are cutting some losses. But we still think central banks and geopolitics will combine to reverse the rally later this year.

Europe’s domestic economy continues to surprise to the upside, can small-cap stocks do the same?

Relative to beaten-down expectations, global growth will surprise on the upside in 2023. Investors should overweight equities for now but look to turn more defensive in the second half of the year.

The European Commission risks retarding the development of long-term contracting for renewable energy just as momentum is building.  Policy uncertainty will continue to dog firms and households in the EU, if the Commission's attempts to lower energy costs for consumers at the expense of renewable-energy producers by extending “windfall profits taxes” and mandated lower costs succeed.  Such measures will lower producers’ revenues, which will translate into lower renewables investment.

Prefer government bonds over stocks, defensive sectors over cyclicals, and large caps over small caps. Favor North America over other markets. Favor emerging markets like Southeast Asia and Latin America over Greater China, Turkey, and emerging Europe. Stick with aerospace/defense stocks.

Prefer government bonds over stocks, defensive sectors over cyclicals, and large caps over small caps. Favor North America over other markets. Favor emerging markets like Southeast Asia and Latin America over Greater China, Turkey, and emerging Europe. Stick with aerospace/defense stocks.

In this <i>Strategy Outlook</i>, we present the major investment themes and views we see playing out next year and beyond.

We are revising our 4Q22 Brent forecast to $90/bbl, expecting December front-line Brent to average $85/bbl. On the back of this early weakness, we are lowering our 2023 forecast slightly to $115/bbl, with an upside bias, anticipating a successful – if chaotic – re-opening in China beginning in 1Q23. Our expectations for copper trading above $4.00/lb in 1Q23 and above $4.50/lb in 2H23 stand.