Is it time to pre-empt dithering broker updates and capitalise on some attractive misprising opps?

The Russia-Ukraine war has turned even the most conservative analysts into commodity bulls.

The Australian Financial Review reported a “wave of upgrades” from various brokers on Thursday. Morgan Stanley was the most notable one, bumping up its price forecasts for several commodities including: 

• Copper +9% to US$4.4/lb 

• Nickel +19% to US$12.8/lb

• Iron ore +9% to US$155 a tonne

• Zinc +48% to US$1.72/lb

• Coking coal +70% to US$418 a tonne

• Thermal coal +96% to US$255 a tonne

• Lithium carbonate +225% to US$46,000 a tonne

What’s interesting is that these price updates are playing catch up to what’s already happened. 

When Russia invaded Ukraine on 24 February, commodity prices, which were already trending upwards, spiked even higher. 

Almost one month into the crisis, Morgan Stanley has finally bumped up its price forecasts. Even then, many of the new price targets are very conservative and close to current spot prices - hardly a tell as to what might happen next.

Take the wheel

Brokers appear to be struggling to keep up with updates for both commodity prices and the related commodity stocks.

The elevated volatility means that investors might need to take matters into their own hands - especially when a single headline about Russia-Ukraine can drive a massive change for near-term commodity outlook and supply/demand.

Earlier this week, Damien Courvalin, head of energy research at Goldman Sachs told CNBC that he expects energy prices to continue higher, but watch out for volatility.

"From here, the [oil price] move is still higher. We have a significant supply shock on a market was already historically tight. The only buffer you have today is demand reduction. We don't have any inventory buffer, OPEC has very limited ability to ramp up and no desire to do so. It really has to come out of demand."

However, recent economic developments such as mixed European manufacturing data, the snapping of robust factory activity in the US and a spike in Chinese covid cases could very well be the beginning of a dent in oil demand.