Analys

A moment in markets – Are we in a commodity supercycle?

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4 år sedan

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19 april, 2021

Redaktionen

The notion of a commodity supercycle is exciting for commodity investors. The term supercycle is used for a bull run that may extend for many years. What rouses investors is not only the prospect of making attractive returns on their commodity investments if there is indeed a supercycle, but also the knowledge that timing the market is not necessarily paramount given the trend might last for several years.

Commodity markets broadly have made significant gains after bottoming out in March last year. But can the bull run be classified as the early phase of a supercycle? The key thing is this: for a cyclical upswing to become a supercycle, there needs to be a structural driver of demand. In the previous so-called commodity supercycle, which took place largely over the first decade of this century, rapid industrialisation in BRIC countries was the catalyst. The 2008 global financial crisis proved to be a decisive setback. Any subsequent recovery in commodities was thwarted initially by the European sovereign debt crisis and eventually by trade wars between China and the US. While there were still instances of strong performance in various commodities individually, gains made by the asset class overall in the first decade of the century were lost in the second.

Hitting rock bottom can introduce a relief rally but is not enough to initiate an entire supercycle. What might be the catalyst for another supercycle in this decade and, if it happens, what shape might it take?

The energy transition could be the key driving force going forward. This megatrend has been catalysed by the pandemic whereby policymakers have recognised the need for fiscal injections to induce growth, rather than relying just on monetary policy. Moreover, a large proportion of any infrastructure spend that gets introduced as part of any fiscal expansion is likely to go towards green initiatives. A third of President Biden’s pledged $2 trillion infrastructure spend is earmarked for the transportation and electric vehicles sector. China has already introduced a new energy vehicle industry plan that has kicked off in 2021 and aims to make pure electric vehicles the mainstream option for automotive sales by 2035. Many countries in Europe have already introduced bans on new internal combustion engine vehicles at various points over the next decade.

Policymakers are therefore paving the way for this industry to thrive. Most recently, the automaker Jaguar Land Rover declared its intentions to test hydrogen fuel cell technology this year in a bid to electrify its entire fleet by 2025. The uptake of electric vehicles from consumers is also on an exponential trajectory. According to Wood Mackenzie, there may be 300 million electric vehicles on roads worldwide by 2040 – up from around 5 million in 2019.

The energy transition bodes well for green metals like copper, nickel, silver, aluminium, and platinum, to name a few. For metals, there is a structural source of demand growth which is expected to accelerate over the coming years, if not decades. Demand is also likely to be global in nature rather than driven by a handful of countries. And weakness in the US dollar in the near term may provide just the added impetus for this megatrend to accelerate.

Commodity investors have numerous options ranging from individual commodities to targeted or broad baskets. The most profound observation when looking at global exchange traded product flows for commodities is how broad baskets have risen from obscurity last year to dominating flows this year. Flows into broad commodities have exceeded $6 billion year to date while industrial metals stand at second place with just under $800 million in net inflows.

To conclude, are we in a bull run for commodities? It certainly appears to be the case. Is it a supercycle? Might be early to say but the question certainly warrants attention. Might a subset of the commodity universe like metals be in a supercycle? It is becoming easier by the day to make that case. Regardless of whether investors subscribe to the notion of a supercycle or not, it is indeed an exciting time for commodities.

Mobeen Tahir, Associate Director, Research, WisdomTree

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Analys

Brent crude ticks higher on tension, but market structure stays soft

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13 timmar sedan

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16 september, 2025

Redaktionen

Brent crude has climbed roughly USD 1.5-2 per barrel since Friday, yet falling USD 0.3 per barrel this mornig and currently trading near USD 67.25/bbl after yesterday’s climb. While the rally reflects short-term geopolitical tension, price action has been choppy, and crude remains locked in a broader range – caught between supply-side pressure and spot resilience.

Ole R. Hvalbye, Analyst Commodities, SEB

Prices have been supported by renewed Ukrainian drone strikes targeting Russian infrastructure. Over the weekend, falling debris triggered a fire at the 20mtpa Kirishi refinery, following last week’s attack on the key Primorsk terminal.

Argus estimates that these attacks have halted ish 300 kbl/d of Russian refining capacity in August and September. While the market impact is limited for now, the action signals Kyiv’s growing willingness to disrupt oil flows – supporting a soft geopolitical floor under prices.

The political environment is shifting: the EU is reportedly considering sanctions on Indian and Chinese firms facilitating Russian crude flows, while the U.S. has so far held back – despite Bessent warning that any action from Washington depends on broader European participation. Senator Graham has also publicly criticized NATO members like Slovakia and Hungary for continuing Russian oil imports.

It’s worth noting that China and India remain the two largest buyers of Russian barrels since the invasion of Ukraine. While New Delhi has been hit with 50% secondary tariffs, Beijing has been spared so far.

Still, the broader supply/demand balance leans bearish. Futures markets reflect this: Brent’s prompt spread (gauge of near-term tightness) has narrowed to the current USD 0.42/bl, down from USD 0.96/bl two months ago, pointing to weakening backwardation.

This aligns with expectations for a record surplus in 2026, largely driven by the faster-than-anticipated return of OPEC+ barrels to market. OPEC+ is gathering in Vienna this week to begin revising member production capacity estimates – setting the stage for new output baselines from 2027. The group aims to agree on how to define “maximum sustainable capacity,” with a proposal expected by year-end.

While the IEA pegs OPEC+ capacity at 47.9 million barrels per day, actual output in August was only 42.4 million barrels per day. Disagreements over data and quota fairness (especially from Iraq and Nigeria) have already delayed this process. Angola even quit the group last year after being assigned a lower target than expected. It also remains unclear whether Russia and Iraq can regain earlier output levels due to infrastructure constraints.

Also, macro remains another key driver this week. A 25bp Fed rate cut is widely expected tomorrow (Wednesday), and commodities in general could benefit a potential cut.

Summing up: Brent crude continues to drift sideways, finding near-term support from geopolitics and refining strength. But with surplus building and market structure softening, the upside may remain capped.

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Volatile but going nowhere. Brent crude circles USD 66 as market weighs surplus vs risk

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5 dagar sedan

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12 september, 2025

Redaktionen

Brent crude is essentially flat on the week, but after a volatile ride. Prices started Monday near USD 65.5/bl, climbed steadily to a mid-week high of USD 67.8/bl on Wednesday evening, before falling sharply – losing about USD 2/bl during Thursday’s session.

Brent is currently trading around USD 65.8/bl, right back where it began. The volatility reflects the market’s ongoing struggle to balance growing surplus risks against persistent geopolitical uncertainty and resilient refined product margins. Thursday’s slide snapped a three-day rally and came largely in response to a string of bearish signals, most notably from the IEA’s updated short-term outlook.

The IEA now projects record global oversupply in 2026, reinforcing concerns flagged earlier by the U.S. EIA, which already sees inventories building this quarter. The forecast comes just days after OPEC+ confirmed it will continue returning idle barrels to the market in October – albeit at a slower pace of +137,000 bl/d. While modest, the move underscores a steady push to reclaim market share and adds to supply-side pressure into year-end.

Thursday’s price drop also followed geopolitical incidences: Israeli airstrikes reportedly targeted Hamas leadership in Doha, while Russian drones crossed into Polish airspace – events that initially sent crude higher as traders covered short positions.

Yet, sentiment remains broadly cautious. Strong refining margins and low inventories at key pricing hubs like Europe continue to support the downside. Chinese stockpiling of discounted Russian barrels and tightness in refined product markets – especially diesel – are also lending support.

On the demand side, the IEA revised up its 2025 global demand growth forecast by 60,000 bl/d to 740,000 bl/d YoY, while leaving 2026 unchanged at 698,000 bl/d. Interestingly, the agency also signaled that its next long-term report could show global oil demand rising through 2050.

Meanwhile, OPEC offered a contrasting view in its latest Monthly Oil Market Report, maintaining expectations for a supply deficit both this year and next, even as its members raise output. The group kept its demand growth estimates for 2025 and 2026 unchanged at 1.29 million bl/d and 1.38 million bl/d, respectively.

We continue to watch whether the bearish supply outlook will outweigh geopolitical risk, and if Brent can continue to find support above USD 65/bl – a level increasingly seen as a soft floor for OPEC+ policy.

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Analys

Waiting for the surplus while we worry about Israel and Qatar

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7 dagar sedan

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10 september, 2025

Redaktionen

Brent crude makes some gains as Israel’s attack on Hamas in Qatar rattles markets. Brent crude spiked to a high of USD 67.38/b yesterday as Israel made a strike on Hamas in Qatar. But it wasn’t able to hold on to that level and only closed up 0.6% in the end at USD 66.39/b. This morning it is starting on the up with a gain of 0.9% at USD 67/b. Still rattled by Israel’s attack on Hamas in Qatar yesterday. Brent is getting some help on the margin this morning with Asian equities higher and copper gaining half a percent. But the dark cloud of surplus ahead is nonetheless hanging over the market with Brent trading two dollar lower than last Tuesday.

Bjarne Schieldrop, Chief analyst commodities, SEB

Geopolitical risk premiums in oil rarely lasts long unless actual supply disruption kicks in. While Israel’s attack on Hamas in Qatar is shocking, the geopolitical risk lifting crude oil yesterday and this morning is unlikely to last very long as such geopolitical risk premiums usually do not last long unless real disruption kicks in.

US API data yesterday indicated a US crude and product stock build last week of 3.1 mb. The US API last evening released partial US oil inventory data indicating that US crude stocks rose 1.3 mb and middle distillates rose 1.5 mb while gasoline rose 0.3 mb. In total a bit more than 3 mb increase. US crude and product stocks usually rise around 1 mb per week this time of year. So US commercial crude and product stock rose 2 mb over the past week adjusted for the seasonal norm. Official and complete data are due today at 16:30.

A 2 mb/week seasonally adj. US stock build implies a 1 – 1.4 mb/d global surplus if it is persistent. Assume that if the global oil market is running a surplus then some 20% to 30% of that surplus ends up in US commercial inventories. A 2 mb seasonally adjusted inventory build equals 286 kb/d. Divide by 0.2 to 0.3 and we get an implied global surplus of 950 kb/d to 1430 kb/d. A 2 mb/week seasonally adjusted build in US oil inventories is close to noise unless it is a persistent pattern every week.

US IEA STEO oil report: Robust surplus ahead and Brent averaging USD 51/b in 2026. The US EIA yesterday released its monthly STEO oil report. It projected a large and persistent surplus ahead. It estimates a global surplus of 2.2 m/d from September to December this year. A 2.4 mb/d surplus in Q1-26 and an average surplus for 2026 of 1.6 mb/d resulting in an average Brent crude oil price of USD 51/b next year. And that includes an assumption where OPEC crude oil production only averages 27.8 mb/d in 2026 versus 27.0 mb/d in 2024 and 28.6 mb/d in August.

Brent will feel the bear-pressure once US/OECD stocks starts visible build. In the meanwhile the oil market sits waiting for this projected surplus to materialize in US and OECD inventories. Once they visibly starts to build on a consistent basis, then Brent crude will likely quickly lose altitude. And unless some unforeseen supply disruption kicks in, it is bound to happen.

US IEA STEO September report. In total not much different than it was in January