Politics and policy may take centre stage

Commodity markets will have little in the way of relevant data to focus on next week. Instead, prices are likely to be driven more by developments on the political and policy fronts. The case of the missing Saudi journalist will no doubt remain in the headlines. After initial combative rhetoric, which prompted a short-lived rise in the oil price, both the US and Saudi Arabia toned down their subsequent comments. However, there remains the risk that the US could seek to punish Saudi Arabia in some way, which could give a renewed fillip to the price of oil. Chinese economic data this week confirmed our view that the economy is slowing. We may see some further loosening of monetary and fiscal policy in China over the next few weeks which could be positive for commodity prices, particularly industrial metals. That said, any policy loosening will take some time to translate into higher economic activity and physical commodities demand.