Reports that the UAE and Saudi Arabia have reached a compromise deal over oil production quotas support our forecast that oil prices will end the year lower. Admittedly, the deal is yet to be agreed by OPEC+. But even if the group fails to reach a formal agreement, we still expect that some members states would raise output above their current quotas to capitalise on high prices.
The focus next week will probably remain on OPEC+ developments, as we wait to hear when the tacit agreement between the UAE and Saudi Arabia will be put in front of the rest of the group. Otherwise, it’s fairly quiet on the data front, with Thursday’s batch of flash PMIs for July the only release of note for commodity markets. We expect the flash manufacturing PMIs for both the euro-zone and UK to edge down, pointing to slightly slower growth in commodity demand there. Finally, we will also be keeping an eye on worsening outbreaks of COVID-19 in South-East Asia, which could pose downside risks for both the supply and demand of some commodities.
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