As we start the last quarter of the year, we continue to the see the surging effect of global inflation, soaring commodity prices and general economic uncertainty buoyed by concerns on Covid-19 vaccination campaigns and expenditure.
Across the globe, inflation rates are experiencing higher highs to levels not seen since the 90s. Economic growth have peaked raising concerns about stagflation. This month panic fuel buying led to a closing down of about 90% of gas stations in the United Kingdom as global oil price reached $80+ per barrel.
Disruptions due to the global pandemic has indeed affected supply adversely fueling an increase in oil prices over 300%+ from the lows recorded in the previous year. Goldman Sachs predicts oil prices to reach $90 to $100 per barrel by December 2021 and the early part of 2022.
In general, we have seen about 27 major commodities outperform the last super cycles in the 1970s and early 2000s (driven by BRIC). Canada inflation hits the highest level in the last 18 years while UK inflation has seen the highest jump since 1997 and the Eurozone inflation has hit a 13-year high.
Aluminum prices hit 13-year high, Nickel prices hit 7-year high, and Uranium prices hit a 10-year high. This bullish sentiments spilled into other commodities with sugar process hitting 4-year highs, cotton prices surpass their previous 10-year highs whilst lithium prices on the back of policy efforts on electric car production jumped 215%+ in 2021. In extension, Natural gas prices hit 7-year highs, representing 350%+ from 2020 lows and food prices are up 33% year on year. Citigroup predicts natural gas oil prices could double from their current levels over the course of the year. Volatility creates opportunities.
Brent crude is currently at $83.26 while WTI crude is at $80.37 per barrel. Prices are converging to the earlier prediction of $100 per barrel by Q4:2021.
To stay ahead of the market, beating inflation is key, the focus will be to use cash and not stockpile cash in a savings account as the interest earned from savings will be insufficient to suppress the effects of loss in investment money value.
Definition of Terms
Commodity Super Cycle = When commodities trade above their long-term price trend over a long period.
BRIC = grouping acronym for Brazil, Russia, India and China.
The US Bureau of Labor Statistics, next release for September, 2021 inflation rate is on October 13, 2021.
Redfox Analytica and Global Markets. https://www.linkedin.com/in/redfoxanalytics/