KB Lancaster Securities expects Commodities to rise with a supercycle imminent
“Commodities have been a frontrunner in the turnaround since the depths of the COVID-19 market scare, and as a result, talk of a commodity supercycle is heating up. We expect the level of allocation into commodities to further increase throughout 2021,” said Aaron Saunders, KB Lancaster Securities’ Corporate Vice President.
Commodity supercycles are decade-long periods in which commodities trade above their long-term price trend. Finance experts at KB Lancaster Securities believe that a new supercycle is beginning now, citing a weakening dollar and supportive central banks and fiscal stimulus geared towards infrastructure spending as well as sustainable energy.
In the usual business cycle, demand pushes prices up, and supply increases to capture that windfall, sending prices down again. A supercycle occurs when supply is so inadequate to demand growth that prices rise for years, often a decade or longer.
“Biden’s huge Green Energy and Infrastructure spending plan ultimately means that the U.S is going to need a lot of commodities,” said William Price, Head of Corporate Asset Management at KB Lancaster Securities. “However, supply is limited, which is yet another indication that we could be on the brink of a new supercycle in commodities, as demand outstrips supply this year.”
KB Lancaster Securities is also expecting Oil consumption to rise in global demand as economies reopen and mobility improves.
Price added, “Tightness in the oil market is expected to remain as demand accelerates amid the easing of mobility restrictions. The crude rally looks to be far from over, with the underlying fundamentals supporting more gains this year”.
Crude prices surged by 8 percent in January, and by the beginning of February, they hit their highest levels in over a year, completely negating the pronounced losses that transpired from the outbreak of the pandemic onward.
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