More of the same

Commodity markets have been relatively quiet over the last few weeks, with many prices trading in a narrow range. There are a few exceptions, most notably the prices of natural gas and coal, which have soared on the back of surging power demand and constrained supply. In contrast, oil has continued to hover around $70 per barrel, as concerns about demand prevent price gains and as OPEC+ supply restraint acts as a floor under prices. We think next week could be a bit directionless again. China is set to publish its monthly activity and spending data on Wednesday, which we expect to show further weakness. So far, commodity prices have been surprisingly sanguine about the economic downturn in China. But there are now clear signs that growth in the US and UK economies is also slowing, which underpins our view that most commodity prices will be falling as we move into 2022. CE Spotlight 2021: The Rebirth Of Inflation? We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.
Caroline Bain Chief Commodities Economist
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More from Commodities

Commodities Update

Omicron puts demand back in the spotlight

We were already downbeat on the outlook for most commodity prices in 2022, not least because we thought that prices had lost touch with demand fundamentals. The risk of Omicron-related effects on demand just adds weight to our view. In view of the wider interest, we are also sending this Commodities Overview Update to clients of all our Commodities services.  

29 November 2021

Commodities Weekly Wrap

New COVID-19 variant could spark energy price falls

Most commodity prices fell on Friday after South African scientists declared they had identified a new COVID-19 variant on Thursday which may be more transmissible. We think it’s still early days to say what this means for the global economy, but it has raised concerns about weaker demand for some commodities, especially oil if travel restrictions are re-imposed. These developments will make the OPEC+ meeting next week even more intriguing. We now think that there is a much higher risk that OPEC+ decides to slow or halt the gradual return of supply given mounting concerns over demand and the release of reserves. Elsewhere, China will publish its manufacturing PMI data (Tuesday/Wednesday), which we expect to show a slight uptick in manufacturing activity. In addition, we should learn more about the new COVID-19 variant and how governments will respond.

26 November 2021

Commodities Update

The slump in the Baltic Dry Index is all about iron ore

Some commentators have pointed to the slump in the Baltic Dry Index as a sign that shipping bottlenecks are easing. But we think it is more a symptom of lower Chinese steel output and plunging iron ore prices.

25 November 2021

More from Caroline Bain

Energy Data Response

US Weekly Petroleum Status Report

There was a small draw in crude stocks last week, despite a dramatic drop in refinery utilisation as many refineries closed ahead of the Hurricane Ida. Notwithstanding, US gasoline demand remained strong, but we suspect that any boost to prices will be offset by softer Asian demand.

9 September 2021

Commodities Economics Chart Book

Commodity prices on increasingly shaky ground

After sharp falls in the middle of the month, most commodity prices ended August broadly flat. However, we doubt it will be long before the downward pressure on prices intensifies again. After all, economic growth in most major economies now looks to be normalising following its surge from pandemic-induced lows, while growth in key commodity consumer China is entering into an outright decline. As a result, we continue to expect most commodity prices to fall in the remainder of this year.

3 September 2021

Commodities Weekly Wrap

Looking for direction

There wasn’t a clear direction in commodity markets this week, with most prices driven by commodity-specific factors. Natural gas and coal prices continued to surge, while the prices of some industrial metals struggled on the back of weaker China PMI data. Oil prices posted a small gain on the week, despite OPEC+ confirming that it will continue to gradually increase output in October, reflecting the fact that such a decision was generally expected. Indeed, the meeting was among the shortest in recent memory. We expect OPEC+ to stick to its current plans to increase production over the next year or so, and this underpins our view that the oil price rally has already peaked. The main focus next week will be on whether the latest set of trade data out of China, due on Tuesday, corroborates the softer PMI data from this week. With high frequency data suggesting that construction activity has dropped back, and foreign demand for Chinese products appearing to level off, we suspect that the recent downward trend in China’s commodity imports continued in August which should have negative implications for prices.

3 September 2021
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