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Natural gas prices strike higher

Natural gas prices were the biggest mover in commodity markets this week, jumping higher on the back of news of potential industrial action at LNG plants in Australia. We don’t think gas prices in Europe are likely to return to their peaks of last year, but the market is clearly sensitive to supply outages. Meanwhile, industrial metals prices generally struggled on a weaker outlook for China’s economy and gold prices fell as the US dollar strengthened.

Next week, China’s industrial production and retail sales for July, released on Tuesday, should show domestic activity is subdued. If it is, expectations of further stimulus are only likely to grow, possibly supporting metals prices. We expect that growth in China’s refinery output may have slowed m/m but that it will remain historically high, supporting crude oil prices.

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