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Weak China demand won’t hold back oil prices

Despite a rise in May, China’s PMIs still point to weak Chinese demand, which will continue to weigh on industrial metals prices. However, the war in Ukraine will remain the bigger driver of energy prices.
Olivia Cross Assistant Economist
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More from Commodities

Commodities Update

Gloomy outlook for use of agriculturals in industry

Deteriorating global economic growth over the coming quarters will weigh on industrial demand for cotton, natural rubber and lumber. That said, high oil prices will offer some support to cotton and natural rubber prices, and our expectation for rate cuts in the US in late 2023 could boost the price of US lumber.

10 August 2022

Commodities Update

China’s copper imports are the only bright spot

Commodity import volumes remained lacklustre in July, consistent with subdued activity in heavy industry and construction. We think import growth should tick up in the coming months in response to higher infrastructure spending and a modest pick-up in activity. But renewed lockdowns pose a downside risk. Oil and the Gulf Drop-In (9th Aug): What’s the outlook for oil prices and what does that mean for Gulf economic outperformance? Join economists from our Commodities and Emerging Markets teams for this 20-minute briefing. Register now.

8 August 2022

Commodities Weekly Wrap

Oil prices fall, but supply risks remain

In a week of relative financial market calm, there was a pause in the large, sentiment-driven swings that have characterised most commodity prices in recent weeks. Instead, prices seemed to take direction from more fundamental drivers. That said, the largest moves were to the downside. Fears about softer demand have weighed particularly heavily on oil prices. But, we would not place too much emphasis on one week of price moves. Volatility in commodity prices has been incredibly high in recent months, and given the scale of supply risks that remain, we suspect there is scope for oil prices to recover some ground. Next week, we’re expecting trade data from China to show that weakness in the construction sector kept imports depressed in July, which will probably weigh on industrial metals prices. However, we expect metals prices to receive some support from a pick-up in Chinese economic activity in the coming quarters. Indeed, despite the deteriorating market backdrop, we suspect that the sharpest falls in industrial metals and agricultural commodities are now behind us.

5 August 2022

More from Olivia Cross

Commodities Watch

Lessons from the spike in agriculture prices in 2007-12

The last time the prices of agricultural commodities rose as sharply as they have done in recent months was in the run up to the Global Financial Crisis and in 2011-12. During these times fears of food shortages were intense and some governments responded with restrictions on the export of staple agricultural commodities. In this Commodities Watch, we look at the differences and similarities between soaring prices in 2007-12 and 2020-22 and discuss whether prices will go into freefall in the coming years as they did in 2013.

31 May 2022

Commodities Update

Risk of tighter agricultural export restrictions growing

The recent tightening of export restrictions has been limiting the supply of staple agricultural commodities available to global markets and pushing up prices. In light of the ban on wheat exports from India, we’ve raised our forecast for the price of wheat from 800 US cents per bushel to 900 by end-2022.

23 May 2022

Commodities Update

Not just Indonesia export ban boosting palm oil prices

We expect Indonesia’s latest ban on palm oil exports to be short-lived, but constrained supply and the high prices of other edible oils, coupled with elevated oil prices, will support the price of palm oil. We’ve revised up our palm oil price forecast to MYR 5,000 per tonne (MYR 4,025 previously) at end-2022.

5 May 2022
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