Near-term risks largely on the downside

The recent more positive tone in commodity markets has been helped by a number of tailwinds that may be about to fade, if not reverse. The boost to Chinese demand from policy stimulus now already appears to be fully priced in, while a resumption of Fed tightening could put renewed upward pressure on the US dollar and sap the appetite for riskier assets more generally. Hopes of a game-changing deal to cut the supply of oil from OPEC and Russia also look likely to be disappointed. Nonetheless, we remain positive about the medium-term outlook for many commodities – including oil, silver, and several industrial metals.