It was a fairly quiet week in commodity markets. The only notable move was a slump in natural gas prices. The EU eventually agreed its long-discussed natural gas price cap early in the week, but it comes with so much conditionality that it is difficult to link it to the latest plunge in prices. Instead, optimism about ample stocks was probably the main driver of the price fall.
Looking ahead, there could be some volatility in prices given that trading volumes are likely to be lower over the holiday period. The only data release of note for commodity markets is the China December manufacturing PMIs (due 31st Dec. and 3rd Jan.), which are likely to show a further deterioration. That said, the PMIs seem to act more as sentiment indicators during COVID outbreaks, and have not given an accurate steer on activity. Instead, we will be using our in-house mobility trackers to gauge industrial activity.
We continue to expect that commodity prices will fall in the first quarter of 2023 as the global economy tips into recession and China grapples with high COVID infection rates. For the latest on our predictions for next year, see our “World in 2023” webpage. Meanwhile, the next edition of the Commodities Weekly Wrap will be published on 6th January 2023.
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