Commodity prices generally rose this week as Fed Chair Jerome Powell’s comments that smaller interest rate rises were likely led to a depreciation in the US dollar. Prices were also supported by news that China would relax some pandemic-related restrictions. But we are not optimistic that this actually signals the beginning of the end of China’s zero-COVID policy. The vaccination rates among the elderly are too low. And even if the policy was abandoned today it could take around six months before activity picked up.
OPEC+ ministers will meet on Sunday to discuss crude production policy in their last scheduled meeting until June 2023. We think that it is unlikely that output quotas will be changed as there is too much uncertainty around Russian production especially as the G7 still hasn’t settled on the level of any price cap. We explained in an Energy Update today that we think that lower Russian production is inevitable.
On the data front, China’s trade data for November will be released next Wednesday. We think cooling global demand and disruption from COVID measures will contribute to a sharp fall in trade. This would also be consistent with our view that growth in China’s industrial metals demand will slow.
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