What a difference a week makes

Oil prices surged by around 10% this week on the back of not very much. Admittedly, OPEC declared that it would clamp down on non-compliant members and re-iterated that it would do what it takes to support prices. And US crude stocks fell in the latest weekly data. But it is hard to be convinced that OPEC has much firepower left given that supply is already very low, and US weekly data are still very distorted by the impact of hurricanes in the Gulf of Mexico. Given the persistent uncertainty about the near-term outlook for demand, we doubt that this is the start of a sustained rally in the oil price. Next week is relatively quiet on the data front. That said, we think that the EU and US Flash PMIs for September will show that the pace of recovery continues to slow, which could cause a slide in industrial commodities prices. In the absence of market-moving data or events, commodity prices are likely to trade in line with investor appetite for risk.