Commodity Weekly (December 07 2020)

Our Commodity Week last week went under the title “Chaos to Reign,” given the then pending culmination of a range of factors, OPEC, vaccine trials and Brexit, and to some extent it didn’t disappoint.

Perhaps the most significant factor (food commodities markets at least) was the agreement amongst the OPEC members that the unwinding of the production cuts would be more measured than expected, leading to oil price strength.

While OPEC may not feature this week, vaccines and Brexit most certainly will, with United Kingdom due to announce the rollout of its vaccination programme, having already trained a significant number of “vaccinators” it is likely that the continued trend to “see through” the Covid-19 impact is going to continue to get stronger.

This therefore means that the focus will shift increasingly towards the outlook for 2021, where there is inevitably going to be a bounce back in comparison to 2020, and beyond.

It is perhaps the “beyond” that continues to cause indigestion for a number of commentators, and we believe that these are going to start to come into greater focus over the coming weeks.

In that context, the “old normal” will return, meaning that the old anxieties of the origin of future growth will resurface and the question of continued demand growth will start to impact the longer end of the forward curve, potentially inducing greater volatility.

In that context, as we said last week that “Chaos to Reign,” so this week will be its reprise.

Next week will be our last commodity week for 2020, but it will return in the first week of January 2021.