The risk premium in oil prices collapsed this week after reports suggested that Israel would not target Iran’s oil and nuclear facilities in any retaliatory strike. With the fundamentals of weak oil demand and increased supply coming back into focus, we think that oil prices will fall further by the end of next year. Meanwhile, the lack of detail about China’s fiscal stimulus have left commodity markets in limbo. While a scenario where support is directed towards infrastructure and property construction could lift industrial metals prices in the near term, we think such a boost would be short-lived.
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