Commodity Weekly (November 23 2020)

Last week, there was a duality in the outlook for where Covid might take us, with the start of the week buoyed by news on other vaccines, offset by the news of the extent of the spread of the virus towards the end of the week.

It now seems as if the relative balance between these two factors, the outlook for the continued effects of the virus, versus the beneficial impact of the vaccine, is dominating the outlook for commodity prices too, especially the deeper more liquid oil market.

We don’t see this changing any time soon, which means that any data release, no matter what it relates to, will be fed into proprietary models.

Ordinarily, more data usually means convergence in differing models’ results. However, in this respect, more data is resulting in a divergence in models’ result, which causes concern that the data is not being treated uniformly by the models, or if it is, that the data itself is being misreported, for whatever reason.

There is little doubt that whatever the outcome, it will not be resolved in the near-term, and will only be fully assessed once the pandemic has passed and an enquiry has been commissioned.

Until then, we think that the models’ output will continue to be volatile. However, increasingly, we see the general population starting to apply their own data points to drive their activity, which means that we anticipate a return to normality far quicker than is currently being factored in.

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