Source: Wall Street
Author: Xu Chao
Goldman Sachs Group, the "standard-bearer of commodities", believes that in the current context of low inventories, supply shortages may push commodity prices up further. As autumn enters the northern hemisphere, higher crude oil prices could prompt investors to return to commodity reflation trading.
Goldman Sachs Group said that under the catalysis of the expanding scope of vaccination, global demand for commodities has gradually recovered. Except for crude oilAlmost all commodity demand has returned to pre-epidemic levels.
As commodity stocks accumulated during the epidemic continued to declineThe market is increasingly vulnerable to short-term supply disruptions (such as Russian gas exports) or unexpected increases in demand (such as hot weather).
Goldman Sachs Group pointed out that the current commodity shortage is not only caused by the COVID-19 epidemic, the decline in long-term capital expenditure since the 2008 financial crisis is also an important factor affecting prices:Low capital expenditure limits the long-term supply of commodities.
In an environment of weak demand from 2018 to 2020, the shortage of commodities caused by low capital expenditure is not obvious. But since the COVID-19 outbreak, governments have prioritized the rapid resumption of economic activity through large-scale fiscal and monetary stimulus, making structural supply shortages of commodities all the more obvious:The continuous decline in inventory makes the trend of supply shortage more obvious.
At the trading level, US stock investors have largely abandoned re-inflationary trading based on sentiment rather than fundamentals: as US economic growth peaked, many investors thought inflationary pressures were over.
But Goldman Sachs Group says the view that inflationary pressures are over may be true for growth-driven financial markets, but not for commodity markets driven by levels of economic activity. Commodity market bullishness still follows the basic principles of supply and demand:Regardless of the rate of economic growth, prices will rise as long as demand is higher than supply.
At a time when commodity inventories continue to fall and demand levels will continue to rise. A small increase in demand will cause prices to soar.
Goldman Sachs Group warned that higher crude oil prices could be a catalyst for investors to return to commodities re-inflationary trading as autumn enters the northern hemisphere.
The Delta virus had a limited impact on global crude oil demand, which barely declined during the outbreak, while the recovery of US crude oil production continued to fall short of market expectations due to the impact of Hurricane Ida. Given the breakdown of the Iran agreement. If oil prices return to $80 a barrel, global investors will return to commodities re-inflationary trading.
Edit / tina