The 1.2m bpd output cut announced by OPEC and its allies today should absorb much of the oil market surplus in the short term. As such, it has sparked a rally in oil prices and in commodities more generally. However, we still expect burgeoning supply from the US and soft demand globally to cause oil prices to drop back in 2019. What’s more, the expected decline in oil prices next year will lower production costs for many other commodities, putting more general downward pressure on prices.
With the OPEC meeting out of the way, the attention of many investors could quickly revert to trade next week. On Monday, China is set to publish its November trade figures. We expect slower growth in commodity imports, notably iron ore and coal, although falling prices may have given a boost to oil imports last month.