Supply cuts unlikely to lift prices yet

Commodity prices are still highly volatile, but they have remained in the doldrums this week despite the rally in other risky assets, notably equities. We have argued for some time that until the virus-containment measures are lifted, looser monetary and fiscal policy is unlikely to give a lift to commodity demand. In a similar vein, a raft of announcements this week of cutbacks at mines and metal producers is unlikely to be enough to prevent further falls in prices, given the moribund state of demand. We think the same holds true in the oil market if OPEC and its allies were to manage to mend fences and agree to cut output. Turning to next week, it goes without saying that the spread of the virus will remain the markets’ focus. But over the next few weeks, economic data releases will become more relevant as they will increasingly cover the period of virus-containment measures. Early next week, China’s March PMI readings will give us some indication of how much of the economy remained offline this month.