Concerns about demand and a move away from ‘risky’ assets, including equities, dragged both energy and industrial metal commodity prices lower this week. In the oil market, we think that any further recovery in oil consumption will be constrained this year as fears of a ‘second wave’ of coronavirus weigh on use in the transport sector. Accordingly, we think that the upside for oil prices this year is limited.
Next week, all eyes will be on China’s activity and spending data for August. In China, fixed investment growth probably accelerated by more than the consensus which, if true, should prove a further positive for the price of industrial commodities, especially as the construction PMI in August pointed to heightened spending on infrastructure and property projects.
Meanwhile, the OPEC+ Joint Ministerial Monitoring Committee is set to meet on Thursday. We don’t expect any significant changes to recommended policy to come from the meeting. As a result, we think that oil prices are more likely to take direction from moves in the US dollar and equities.
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