The commodity sector was heading for one of its biggest weekly losses since the early pandemic panic last March as the reflation trade deflated at a rapid pace after the FOMC signaled it would speed up its expected pace of policy tightening, thereby potentially lowering the risk of runaway inflation. Adding to these was continued efforts by the Chinese authorities to reduce inflation through curbing speculation and the hoarding of commodities. Finally, a stronger dollar also created headwinds after reaching a two-month high against a basket of currencies.

After a momentous rally this year, it looks like oil prices are finally coming under pressure – with the threat of inflation dampening oil market optimism. The months-long oil price rally hit the pause button this week, following a shift in outlook from the U.S. Federal Reserve. “Inflation is your friend until it isn’t,” Louise Dickson of Rystad Energy said in a statement. “The oil market is re-learning this lesson in the past two trading days after the US central bank hinted at potential interest rate hikes in 2023, which would make oil more expensive in non-dollar denominated economies and could damper demand.”

U.S. oil output from seven major shale formations is expected to rise by about 38,000 barrels per day in July to about 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said. U.S. producers have increased drilling activity as oil prices have rebounded to about $70 a barrel. 

Commodities traded higher for a third week with broad gains in energy and metals off-setting pockets of weakness across the agriculture sector. As a result, the Bloomberg Commodity Spot Index, which tracks the front-month performance of major commodity futures, continued to trade near a ten-year high.

Oil prices climbed on Friday as the International Energy Agency boosted optimism about global oil demand recovery, Oilprice said. Oil rises for third week on positive economic news in the U.S. and accelerating global vaccination campaigns. The road traffic in the U.S. and much of Europe is largely back to levels seen before the pandemic. 

The world’s energy and climate future increasingly hinges on whether emerging and developing economies are able to successfully transition to cleaner energy systems, calling for a step change in global efforts to mobilise and channel the massive surge in investment that is required, according to a new report by the International Energy Agency. It’s time to make clean energy investment in emerging and developing economies a top global priority.

The Bloomberg Commodity Spot Index reached a fresh ten-year high despite worries that stronger-than-expected macro data from an overstimulated U.S. economy could see the Federal Reserve start talking more openly about reducing support. 

Oil prices held their gains at the start of the week, with Brent at $71 and WTI just below $70. “For many, the $70 per barrel oil signal may be enough for investors to cash out of the bull cycle early – likely what happened today – which would stifle the upward price trajectory forecasted by our bullish crude balances,” said Louise Dickson, an analyst at Rystad Energy. Investors are scoping up options bets on crude that pay off if oil prices soar to $100 per barrel. 

As spending rebounds towards pre-crisis levels, not enough is going into clean energy, especially in emerging market and developing economies, new IEA report finds.

Global energy investments set to recover in 2021 but remain far from a net zero pathway. With energy investment returning to pre-crisis levels, its composition is continuing to shift towards electricity: 2021 is on course to be the sixth year in a row that investment in the power sector exceeds that in traditional oil and gas supply, according to the World Energy Investment 2021 report.