Oil to outperform in Q3

We expect strong growth in oil demand this quarter as virus-related travel restrictions are lifted in most of the largest consuming countries. At the same time, supply will remain relatively constrained even if, as we think likely, OPEC+ is gradually raising output. These positive fundamentals should push oil prices higher in the coming weeks, before they start to fall back later in the year. By contrast, we think industrial metals prices have probably already peaked. China’s June PMI readings, released this week, were weaker and we expect growth in the economy to slow further as policy conditions tighten. What’s more, the PMIs showed some softening in orders for China’s exports, which are typically metals-intensive. Turning to next week, it is relatively quiet on the data front although the oil market will presumably be digesting the outcome of today’s OPEC+ meeting. At the time of writing, the group was still in discussion about production quotas for August. We will analyse the outcome of the meeting in a forthcoming Energy Update, early next week.