Oil prices making up for lost time

It was a relatively two-sided affair in commodities markets this week. On the one hand, oil prices rose on the back of greater-than-expected output restraint announced by OPEC+. And on the other hand, a partial unwinding of investor optimism weighed on many metals prices. While we expect oil demand and prices to rise in the second half of 2021 in tandem with the easing of lockdown measures, we think that industrial metals prices will fall further, primarily because we expect demand growth in China to ease back. Next week brings a raft of data from China, as well as daily announcements from the National People’s Congress (NPC) through to Thursday. On the data front, trade data from China are likely to appear flattering in y/y terms, but they may show that the momentum in trade volume growth is easing back. Meanwhile, credit growth is likely to have slowed further. (See our China Economics Weekly.) If we are correct, these data releases could take some more shine off industrial metals prices. Elsewhere, please join us on Tuesday, 9^th March for a commodities webinar when we will discuss whether the current commodity price rally is a cyclical upturn or the start of a new supercycle. Register here.