BAKU, Azerbaijan, Sept.25
By Leman Zeynalova – Trend:
Although a vaccine against COVID-19 may not dramatically alter the near-term economic outlook, it would structurally improve the demand prospects for many commodities and therefore boost prices, particularly for crude oil, Trend reports citing Capital Economics, a UK-based research and consulting company.
“As a ‘second wave’ of COVID-19 infections begins to rear its head, the development and implementation of a vaccine has come under renewed scrutiny. But while a vaccine would mark a breakthrough in the battle against COVID-19, it may not transform the immediate economic outlook. In any case, much depends on the efficacy of the vaccine, as well as the speed of its production and distribution.
“However, we reckon that the impact of a vaccine will probably be positive for commodity demand and prices. After all, many commodity prices have plunged this year as a direct result of the negative impact on demand of virus-containment measures. However, it is unlikely that price gains would be uniform.
“We expect that a key beneficiary of a vaccine would be oil demand. Behavioural changes brought about by COVID-19, such as increased working from home and fewer flights, have structurally lowered demand. We reckon that these changes could be at least partially reversed with a vaccine. For example, a vaccine could prompt an easing of travel restrictions, lifting demand for passenger flights, and by extension, jet fuel demand. Indeed, the number of commercial flights is still down by over 40% y/y.
“That said, a vaccine may have less of a positive effect on prices if it were rolled out in a few years rather than next year. We suspect that as behavioural changes become more ingrained, the impact of a vaccine in partly reversing such trends would probably be reduced.
“Meanwhile, we expect that price gains for metals markets would be more limited. For one, the prices of industrial metals have already rebounded from their virus-induced slump, following China’s speedy economic revival.
“What’s more, we think that metals prices are likely to rise a little further in the year ahead – even without a vaccine – on the back of metals-intensive infrastructure stimulus in China, the world’s largest consumer (by far) of metals. By contrast, a vaccine would probably ease concerns about the outlook for the global economy, weighing on demand for safe assets such as gold,” reads a report released by Capital Economics.
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