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Geopolitics back with a bang in the oil market

Crude oil prices rose by around 10% this week as OPEC+ announced a 2m bpd cut to its production quota, which all but guarantees that the market will be in a deficit in Q4. Accordingly, we are sticking to our forecast that the oil price (Brent) will be at around $100 per barrel at end-2022.

Aside from the impact on oil supply, the OPEC+ decision is significant in that the group decided to ignore US pressure to boost supply. We think this is an example of the sort of fracturing in global economic relations that we discuss in our latest Spotlight series. (Register for online events 10th-20th Oct.) In the coming weeks, we may see US intervention in the oil market and/or in its relations with Saudi Arabia.

Next week, commodity prices will take direction from US inflation data out on Thursday. We’re expecting headline inflation to have eased to 7.9% in September, from 8.3% in August. There will also be plenty of data out of China to digest, after this week’s national holiday. Elsewhere, the EU will continue to debate measures to curb the high cost of natural gas, while the LME will be consulting with traders on a ban on Russian metal in its warehouses. The latter would add to supply constraints in the metals markets.

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