Still a bumpy road ahead

Despite a raft of terrible economic data, industrial commodity prices ended the week broadly flat, except for oil prices which rose sharply. Attention is turning to the potential relaxation of containment measures, as several countries “pass the peak” of the virus. But there is still a long way to go. Even if restrictions are eased, China’s experience suggests that demand will be slow to recover. And there is still a risk that a “second wave” of the virus forces policymakers to tighten measures, as Singapore can attest to. With that in mind, we expect prices to remain volatile over the next few weeks, especially in the oil market where a lack of storage space continues to weigh on spot and near-term futures prices in the US.   Next week, the Texas Railroad Commission meets on Tuesday to discuss cuts to oil output (Texas accounts for two-fifths of US oil production). However, even if cuts are agreed, we suspect that the impact on oil prices will be minimal. After all, US oil production is already set to fall regardless of any mandated cuts. Otherwise, we expect the April trade data for China (Thursday) to show a further slump in commodity exports. Imports are likely to have weakened too, after inventories of raw materials in China surged in Q1.