Publications: Notes at the Margin

Oil: Excluded from the Commodity Supercycle (September 13, 2021)


Early in 2021, Goldman Sachs and other investment banks began touting a new supercycle for commodities. On February 8, 2021, Financial Times published this quote from the firm:


“It’s easy—and largely accurate—to present the 2021 commodity outlook as a V-shaped vaccine trade,” said Goldman Sachs in a recent report. “What we think is key, however, is that this recovery in commodity prices will actually be the beginning of a much longer structural bull market for commodities.”


Over the next eight months, crude oil prices increased by twenty percent. Aluminum prices, on the other hand, rose by thirty-five percent, spot Henry Hub natural gas prices jumped sixty-five percent, and uranium prices are up by forty-seven percent.


There is one factor behind the disparate moves in commodity prices: China. As noted in several recent reports, China has moved to soften commodity price increases where it can suppress consumption or increase supplies by drawing from its stockpiles. These efforts will likely continue.


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