Saudi Arabia springs a surprise

After a strong finish to 2020, most commodity prices built on their gains in the first week of January, as investor sentiment continued to prove supportive and Saudi Arabia announced that it would unilaterally cut oil production in February and March. In direct contrast to last year, we expect energy commodities to outperform other commodities in 2021, as a gradual relaxation of COVID-19 containment measures leads to a revival in demand. Next week will bring economic data from China on credit growth and trade. (See our China Economics Weekly.) We suspect that broad credit growth slowed a little in December, while import growth is likely to have accelerated further. Taken altogether alongside a strong reading in the December construction PMI, we think that industrial metals demand and prices will remain well-supported in the near term.