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The voluntary production cuts announced by OPEC+ this week will support oil prices in the first quarter of next year, but there is clearly dissent among the ranks. We think OPEC+’s next move will be to increase production. After much wrangling, some …
1st December 2023
China PMI surveys suggest that the economy flatlined in November, but there was good news for commodity demand with the relative strength in the construction PMI. We suspect that underlying activity is stronger than the PMIs and that this will support …
Today, OPEC+ announced 1mn barrels per day (bpd) of voluntary cuts to supply in Q1 2024. This comes on top of around 5mn bpd in cuts already in situ, and brings the total cut in the first quarter to around 6% of global production. The group is presumably …
30th November 2023
In this Global Economics Update , we describe eight of the biggest risks to our economic forecasts for 2024. The unusual nature of this cycle and uncertainties surrounding the transmission of monetary policy mean that the biggest risks relate to central …
Guyana’s oil production looks set to grow quickly over the next few years even if the total volume can only play a small role in raising global supply. That said, substantial reserves and low break-even costs should mean that it can continue to produce …
27th November 2023
Moves in commodity prices have been fairly muted on the week, but this masks a dramatic mid-week plunge and recovery in oil prices. The big news was that OPEC+ announced a four-day delay to its policy meeting, apparently because of disagreements among …
24th November 2023
Coal prices in both Europe and Asia will fall next year as growth in demand eases. But the fall in Europe should be larger as we expect demand there to outright contract. This should ensure that coal prices in Asia trade at a premium to prices in Europe …
22nd November 2023
China steel output should fall some more The monthly fall in China’s steel production should continue over the next two months, but the outlook is a little brighter in 2024. Elsewhere, production rose in October, and India’s production in particular …
Supply stays strong Global aluminium production rose in October and set a monthly record. This is unlikely to be broken over the next few months as China’s output should fall as smelters curb output over winter. According to the International Aluminium …
20th November 2023
Gold and silver prices soared this week on renewed optimism that the Fed had hiked to the peak of its monetary policy mountain. We expect prices to rise further when interest rates begin to be cut in the first half of next year. Oil prices were not …
17th November 2023
The US and China once again backed the G20 goal of tripling global renewable energy capacity this week (from 2020), a goal which would help to keep the path to net zero emissions by 2050 on track. However, the speed of the energy transition is uncertain, …
During the past decade, the global economy has transitioned out of an era in which globalisation was the key driver of economic and financial relationships into one shaped by geopolitics. Previously, most governments had believed that closer economic …
16th November 2023
Protests against a large copper mine have raged in Panama over the past few weeks. If mine production ceased, there would be noticeable impact on global supply but the risk of this happening is small. The mine is a key part of Panama’s economy and is only …
9th November 2023
We have raised our gold price forecast to reflect the current heightened geopolitical risk. We think the price will rise further next year as the limited fallout from the conflict won’t prevent the US Fed from starting to cut interest rates in 2024. Our …
The Vaca Muerta shale formation will alleviate some of the pressure on Argentina’s fragile balance of payments position by substantially reducing the country’s gas import bill and raising oil export revenues. While this is good news for the crisis-ridden …
8th November 2023
China’s import data for October indicated that its demand for commodities remains robust but we think that further growth in the next couple of months is likely to be modest. China’s preliminary trade data for October, released today , showed a …
7th November 2023
Energy and precious metal prices will remain volatile while there is a risk that the war between Israel and Hamas expands to include other countries in the region. For now, energy supplies have been largely uninterrupted, and prices should remain close to …
3rd November 2023
Oil prices continued to fall this week, perhaps reflecting less concern that the Israel-Hamas conflict will expand to other countries in the region and that Middle East oil supply will be negatively affected. Consistent with this, the price of gold fell …
Energy prices will remain historically high over the remainder of this year. The Israel-Hamas conflict has increased volatility in energy markets, but supply has not been disrupted. Oil prices will remain high as OPEC+ output cuts keep supply constrained. …
The underperformance of wind and solar equities since early 2021 has largely been driven by higher interest rates, which disproportionately affect the cost of renewables projects. But while the days of ultra-low financing costs are behind us, our …
2nd November 2023
The PMI surveys released so far for China weakened in October with the manufacturing PMIs falling back into contractionary territory. We think China’s demand for commodities will be supported by further fiscal stimulus over the next few months, but a …
1st November 2023
The conflict between Israel and Hamas continued to drive commodity prices this week. Oil prices fell back while gold prices defied the stronger dollar and held steady. Elsewhere, forecasts of cold weather sent US natural gas prices soaring. (See Chart …
27th October 2023
We think the cautious oil market reaction to the outbreak of conflict in Israel probably reflects the huge uncertainty about the eventual outcome, but also a somewhat lower “Middle East” risk premium. For context, the Brent crude oil price has risen by …
26th October 2023
The war between Hamas and Israel – and the potential for escalation to the wider region – has increased the uncertainty around the economic and financial market outlook, but in most scenarios is unlikely to generate a sustained hit to major asset markets. …
EU natural gas prices have risen in recent weeks highlighting that a reliance on LNG imports is not without risk. That said, prices should fall back next year as a significant amount of LNG export capacity comes online, first in the US and then in Qatar. …
25th October 2023
Argentina’s oil and gas production growth has slowed sharply recently due to pipeline capacity constraints. New projects should ease these bottlenecks, and production should rise from 2024. Admittedly, the expected increases in output are not large enough …
Further falls in global steel supply are likely Monthly global steel output in September fell in year-on-year terms for the first time in 2023, in large part due to a contraction in China’s production. With demand set to remain weak and low profitability …
24th October 2023
It was generally a strong week for commodity prices as mounting geopolitical tensions boosted the oil price. In turn, higher oil prices put upward pressure on most agricultural prices. (See Chart 1.) Chart 1: Price Changes (%, w/w) Source: Refinitiv …
20th October 2023
Robust supply growth, but it is mostly a China story After reaching a record high in August, global aluminium production eased back in September but remained strong. Given that demand growth is relatively subdued, the increase in global supply may only …
2023 is on track to be the warmest year on record, but somewhat ominously the headwinds to the green transition have strengthened this year. Some of these will prove temporary, particularly as short-term policy interest rates start to come down. That …
19th October 2023
After several years in a post-Fukushima wilderness, nuclear power’s ability to provide low-emission and reliable electricity generation has slowly brought it back into favour around the world. Several countries, particularly in Asia, are likely to bring …
The reported deal that is close to being reached to lift US sanctions on Venezuela’s oil sector in return for competitive elections would help to raise the country’s oil output from very depressed levels. But the sector requires enormous investment to …
16th October 2023
Cobalt is likely to keep its position as a leading battery metal for years to come, but its high cost compared to alternative metals means that cobalt demand won’t grow as fast as overall battery production. This is a key reason why we think that the …
13th October 2023
It was a mixed week for prices, with energy, agricultural and precious metals outperforming industrial metals. (See Chart 1.) Chart 1: S&P GSCI Sub Indices (3 rd Apr. 2023 = 100) Source: Refinitiv Capital Economics Energy prices rose on the back of the …
China imported fewer key commodities in September than in August, but its underlying demand for commodities, especially fossil fuels, remains strong and is only likely to strengthen from here. China’s preliminary trade data, released today , showed m/m …
The conflict between Hamas and Israel will negatively affect Israel’s natural gas exports. However, the bigger concern for global natural gas prices is the risk of the conflict spreading. The European natural gas price has risen by about 30% w/w to €48 …
12th October 2023
China’s recent commodity demand has been stronger than might have been expected given the weakness of its economy and commodity-intensive property sector in particular. This partly reflects a step-up in infrastructure spending and resilience in …
The price of wheat and corn will stay historically high for now, as Russia’s withdrawal from the Black Sea Grain Initiative has re-ignited concerns about supply from Ukraine. We think that prices will drift lower into 2025 as supply from other producers …
11th October 2023
Note: We discussed the outlook for oil prices and the geo-economics around the conflict between Israel and Hamas in a Drop-In on 9th October. Click here to watch the recording. First and foremost, the renewed fighting between Hamas and Israel since the …
9th October 2023
The attack by Hamas on Israel on Saturday has led to widespread casualties and deaths, and the declaration of war by Israel’s prime minister. From an economic perspective, the experience from the 2014 Gaza war suggests that the effects on Israel’s economy …
It has been a week of declines for most commodity prices, as commodities were caught up in the more widespread selling of financial assets. (See Chart 1.) Chart 1: S&P GSCI and US 10Y Treasury Yield Sources: Refinitiv, Capital Economics Crude oil prices …
6th October 2023
The trend of rapid increases in industrial metals supply this year is likely to unwind over the next few years for copper, but we think nickel supply growth will remain robust. We think that divergence will be a key reason why the price of copper will …
5th October 2023
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
Strong production growth has helped to pull US natural gas prices below 2019 levels for most of this year. But prices should rise by the end of 2024 as production growth is set to ease and exports will surge when LNG export capacity rises by nearly a …
2nd October 2023
The latest above-50 readings in China’s PMIs are consistent with our view that China’s demand for commodities will remain solid in the second half of this year, but not grow strongly. The China PMIs released over the weekend pointed to fairly stable …
Our in-house metals demand proxies show that growth was subdued in mid-2023. There could be some pick-up in the coming months owing to additional Chinese infrastructure spending, but we think a more sustainable revival in global demand will only emerge in …
29th September 2023
There wasn’t a clear trend in commodity prices this week. Natural gas prices in the US and Europe were among the largest risers, though those increases appear to have been driven by dips in regional output in both, and cold weather forecasts in the …
Overview – We expect most commodity prices to struggle over the rest of this year as developed economies flirt with recession, the US dollar remains strong and investor risk appetite moderates. That said, we wouldn’t be surprised if the Brent oil price …
26th September 2023
Global steel production growth continues to struggle The slowdown in global steel production in August is consistent with our long-held view that slowing demand will weigh on production in the second half of this year. Weakening demand stems from slowing …
25th September 2023
Investment in the green transition is unlikely to rise quickly enough this decade to help achieve net zero by 2050. But a greater focus on areas including renewables and electric vehicles will still probably push up investment’s share of global GDP by …
