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eToro Post – Outlook for Commodities from Q3 2022

This post was originally shared on my eToro feed in late September 2022. Make sure to follow me there as well, and did you know that you can copy my trading there for free? Create an account today, copy my portfolio by searching for user “Allseasonsport” to automatically duplicate my All Seasons Portfolio strategy effortlessly.

Since I joined eToro in April 2021, I have been sharing insights and observations about investing with risk balanced strategies such as the All Seasons Portfolio strategy which I blog about here. As eToro is a social trading platform, I from time to time share content directly in my eToro feed, which I then share on the blog in posts like this.


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A recent interview with Goldman Sachs global head of Commodities Research, Jeff Curie, on Meb Faber’s podcast (episode 445:, available on most podcast apps) caught my interest with a summary of the commodities outlook and where we are in a commodity supercycle with current underinvestment in the supply side

The main take out from this interview is that this last year’s increase in commodity prices is not caused by Russia, but the underlying structural issues were caused by policy and underinvestment in the sector in the last decade, which Russia has taken advantage of.

A typical cycle in the commodity sector is usually caused by prolonged underinvestment (due to low prices, other assets such as tech stocks being more attractive, etc.), leading to rising prices. But, higher prices do not immediately trigger increased investments either, as commodities (metals and energies) usually remain unattractive for 3-5 years more due to their unfavourable environmental appeal.

But then finally, investment begins but as there is considerable lag to get mines, wells and refineries operational (3-7 years depending on asset), the effects are visible only much later and, with over investment, prices come crashing down again. Due to the long lead times, the supercycles are typically decade long with the last two both having taken 12 years to play out.


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In the current regime, the rates hikes now is an attempt to cut demand for long enough to get supply back up online to meet the imbalance. Currently, much of the oil supply is offline in Nigeria, copper supply in Latin America is declining due to a political risk, and grains are negatively hit by extreme weather conditions like droughts and torrential rain.

If demand can be strangled for long enough through monetary policy and release of oil from the Strategic Petroleum Reserve until supply can improve, the balance will come back. Rate hikes solve the near-term problem, but investment is needed for the longer term to keep prices down.

However, there isn’t any investment at this time. ESG policies make investments in this sector unattractive and delay investment in new rigs and mines, which further increases the probability of supply side imbalance.

Let us also add a historical perspective. In the last commodity supercycle in the 2000s, the bull market started in 2002, but it was not until 2005 that investments began. Then with the rate-hiking period in 2004 to 2006, the yield curve inverted in 2006, with the market expecting a recession, and oil fell from $77 to $45. But, when the recession hit in 2008, oil went up to $147.

In the 1970s, a decade famous for its rallying commodities, it was set up by low rates in the 1960s and with stocks like the Nifty 50 being more attractive investments than commodity producers. That led to higher commodity prices that were taken advantage of with the OPEC oil embargo. The embargo did not cause the price spike, but OPEC took advantage of the structural imbalance. This echoes today’s situation: a decade of underinvestment in the commodity sector created an opportunity for Russia to exploit.

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What to expect going forward? To lessen the impact of the imbalance in the short term, about 1 million barrels per week is released from the Strategic Petroleum Reserve. Thereafter, that amount of output needs to be replaced to keep the supply-demand balance in check. With oil supply impaired in Venezuela, Nigeria, etc. we are already in a difficult spot, especially as Europe needs to reroute its oil imports from Russia to other suppliers (albeit it might be the very same oil just passing through). It is likely that the retreat in oil and commodity prices we see in the second half of 2022 is just a temporary decline, before another leg higher in 2023-2024.

While oil wells can take just six months to come online, infrastructure needs an additional 2-3 years, and refineries 5+ years to build, meaning that there are no quick fixes. Translated to the mining industry, a copper mine takes 7+ years to come online.

It will take time before sufficient investment has flowed into the commodity sector, and even longer before we start to see the effects of prices coming down. Hence, over the coming half-decade, we are likely to see higher prices than the top notations from the first half of 2022.


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If you are not invested in commodities already, the current drawdown is a good time to increase your allocation to alternatives, as stocks and bonds are unlikely to outperform in the coming decade.

As for my All Seasons Portfolio on eToro, I always have a 10% allocation to commodities, (with additional gold holding) as an inflation hedge, with a systematic tactical increase in this allocation during inflationary periods. Now that allocation could also ride on the commodity supercycle wave for at least a few years.

That is quite a comeback to expect over the 2020s for one of the most hated asset classes in the 2010s, and I recommend that you listen to the whole interview for all the flavour I wasn’t able to fit in this brief post.

Thanks for your attention, and I hope you enjoy these occasional updates and insights about mechanics of my strategy.

You are more than welcome to stick around for this journey that I have been on for several years already with this strategy, and I look forward to interacting with you along the way. And make sure you look up my profile on eToro, if you haven’t already by searching for user “Allseasonsport”.

All the best,

The opinions shared in this article are those of the author and do not constitute investment advice in any form. Any mentions of my trading strategy are for descriptive and information purposes only of what I do with my money. All investments carry the risk of capital loss.

This post includes affiliate links for eToro, and by clicking the links, I may get a compensation, at no extra cost or disadvantage for you. On eToro, the trading on my account is done with my own money, and if you chose to copy my trading, I have skin in the game and incentives to stick to my strategy and perform well.

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