Impact of Suez blockage likely to be short-lived

Commodities markets were something of a mixed bag this week. The grounding of a container ship in the Suez Canal helped to prop up the prices of some commodities despite growing worries over the potential hit to demand in Europe from the slow vaccine rollout and lockdown extensions. The Suez blockage pushed up the price of natural gas, and it also put the brakes on the decline in oil prices seen earlier in the week. Ultimately though, while there may be a temporary boost to commodity prices as freight is disrupted and ships are forced to divert around Africa, we don’t foresee any long-lasting implications. Countries will source commodities from elsewhere or draw down stocks until the canal re-opens. Next week, while eyes may remain on progress resolving the blockage in the Suez Canal, the main events will be the release of the March PMI data and the OPEC+ meeting, both scheduled for Thursday. We expect China’s manufacturing PMI to show that foreign demand boosted factory activity and the US data are likely to be strong too. Meanwhile, with oil prices having fallen back since the last OPEC+ meeting and the recovery in US oil output remaining sluggish, it seems likely that OPEC+ members will maintain their current low level of oil production for another month.