Zimpapers Logo

Commodities face a daunting array of challenges in the final stretch of a turbulent year after capping their first back-to-back quarterly loss since 2019. Demand disruption as central banks hike rates to fight inflation, Europe’s energy crisis, extreme weather risks, and deep policy uncertainty in China are among the major features that investors will need to navigate.

In the near term, traders are focused on OPEC+ this week as the alliance weighs a major supply cut, while gas markets will be on alert as Moscow escalates tensions with Europe.

Elsewhere, Hurricane Ian’s impacts are under scrutiny as President Joe Biden heads to Florida, while China is off for a week-long break as the pivotal Communist Party congress looms in mid-October.

Goldman Sachs Group Inc. now reckons that commodities are caught up in a negative feedback loop driven by the dollar and shifts in rates as the Federal Reserve goes all out. In addition to the OPEC+ gathering, here’s a guide to major themes that will shape raw materials over the balance of the year.

Time to cut?

Oil just capped a painful quarterly loss as commodities cooled and analysts are deeply divided on what comes next. 

Proceedings this week will be dominated by a key meeting of OPEC and allies as they discuss another production cut to fight slacker consumption and sinking prices. 

The group will consider a reduction of more than 1 million barrels a day, according to delegates, as ministers meets in person Wednesday for the first time in more than two years.

While Standard Chartered Plc points to a “large surplus” of oil looming, and top trader Trafigura Group sees near-term weakness persisting, Goldman Sachs Group Inc. sees markets tightening as consumers switch from super-expensive gas to oil.

Supplies could also narrow as an EU embargo on Russian oil nears, according to the International Energy Agency. Volatility seems guaranteed.. – Bloomberg