Energy to remain in the spotlight

It is perhaps too soon to call the end of the energy price rally, but the prices of European natural gas and Chinese coal took a tumble this week as supply fears were, at least partially, allayed. What’s more, the recent surge in oil prices stalled. Energy commodities will remain in focus next week with the start of the COP26 climate change summit in Glasgow on Sunday and the monthly meeting of OPEC+ on Thursday. Any major COP26 announcements on reducing the role of fossil fuels will have implications for our long-run energy demand and price forecasts. However, the outcome of the OPEC+ meeting is likely to have more of an impact on current oil prices. Despite mounting political pressure (from the US, India and Japan), we think that OPEC+ is likely to stick with its current target of raising output by 400,000 bpd per month until the end of the year. This decision may offer some support to prices, but it will not come as a major surprise. Elsewhere, China is set to publish its October PMIs early in the week which we expect to be little changed from September. Therefore, they are unlikely to move industrial commodity prices.