Below is a  summary of comments made here by Goldman Sachs Global Head of Commodities Research, Jeff Currie, who had been a prominent advocate of an oil supercycle in the early 2000s, is now once again predicting a new super cycle in commodities.

• The Commodity markets have seen two super cycles in the past 70 years, and Jeff Curry, Global Head of Commodities Research at Goldman Sachs, believes we are on the cusp of a third.
• Jeff believes that a super cycle is nothing more than a CAPEX cycle. There is a close relationship between global CAPEX and global GDP and metal prices.  When you look at a chart of Global CAPEX/Global GDP to capture a CAPEX cycle this is highly correlated with metal prices.
• The super cycles of the 1960s and 2000s were driven by the ‘new economy equity bubbles’ of the time – be it the Nifty 50, the .coms, or the Chinese admission to the WTO. These equity bubbles choked off capital to the old economy, oil, has, metals, mining and the rest of them and they became very under invested and all it took was a demand event. In 1968 it was the Great Society and in the 2000s it was China’s admission to the WHO and this time it was COVID stimulus – but they all did the same thing – draw down inventories and exhaust spare capacity leaving the market vulnerable to future demand growth.
• The super cycle is different this time around due its overlay of environmental policy. This has made it difficult to attract capital into the sector, and Jeff believes it is due to a bad taste left in investors’ mouths from the oil and commodities sector having destroyed 54 cents of every dollar invested over the previous decade.
• Some argue that a super cycle requires three indicators – surging demand, surging prices, and surging supply – and that the Commodities markets currently fail all three tests. Jeff argues that the lack of investment in the Commodities sector has led to a surge in prices, and that the demand for green capex this decade is bigger than the demand for capex during the China boom of the 2000s.
• The surge in current demand has been driven by the disproportionate stimulus during COVID being provided to low income households which consume a lot more commodities keeping the demand side strong. The Chinese driven surge in demand was the metals demand boom to construct cities and infrastructure.  The current surge in demand is due to EVs and decarbonization and green technologies. 
• The super cycle may be affected by the world’s transition to low-carbon energies, but Jeff points out that the Pariah Commodities of coal and tobacco prices have been shocked to the Moon due to their lack of investment.
• He believes that current policies are not leading to the decline in demand that has been forecasted, and that peak oil demand will not be seen until the early 2030s. The eulogy for oil is premature. 
• The final factor that may affect the super cycle is global interest rates. Jeff believes that when interest rates are zero, investors focus on long-term growth opportunities, but that higher interest rates bring the focus in to near-term activities, making putting a drill bit in the ground more profitable than tech opportunities.
• The recent rise in interest rates has had a significant impact on the global economy, particularly in the commodity markets. Higher interest rates mean that people have to make choices when it comes to investing, and they often choose to invest in physical assets such as oil, metals, and agriculture. This is because these assets offer a better return than financial assets in a higher rate environment.
• Higher interest rates make that long term tech story not very interesting, but they make near term oil, gas, metals, agriculture old economy boring assets far more interesting in a higher rate environment. Higher rates mean a better return in the physical world than the financial world.
• In the medium-term, it is best to invest in a diversified commodity index, such as the BCOM index, in order to ensure that the investor is not making a sector call.
• In the short-term, Russian oil supply has proven to be resilient, but the upcoming products ban could cause a disruption in the market. The expected 600,000 barrels per day of lost supply could lead to a spike in prices post February 5th.
• Finally, looking to the long-term, Europe’s natural gas inventories have been lifted after a warmer winter, but with Russian Pipeline gas curtailed for many months now, the upcoming winter will be the real test for Europe. Gas prices may not retest the 2022 highs, but the reopening of Europe and China have created a positive outlook for commodities in the next six to twelve months.