Ten months ago futures contracts for US crude oil went negative for the first time as traders rushed to get oil off their hands in a supply glut triggered by lockdowns.
Those surreal days look unlikely to be repeated during this pandemic, with Brent crude this week hitting $66 a barrel – the same level as the start of last year. West Texas Intermediate, the North American benchmark, has also added more than $10 this year to $63.
Meanwhile, copper hit $9,000 for the first time in almost a decade, and mining giants BHP and Rio Tinto are handing out bumper dividends on the back of rising iron ore prices. Soybean prices are also up.
Chinese demand – both for use and for stockpiling – is key to the metals rally, as it has been for the last 20 years. But prices are also being boosted by financial investors worried about inflation, and optimism about massive global spending on green projects and the vaccine rollout.
“Even if we take the microcosm of the UK, you are seeing that [optimism] with all the campsites being booked,” says Chris Midgley, global head of analytics at S&P Global Platts. “Sectors are going to get a huge boost. We can see demand [for oil] growing at 3m barrels a month.”
With spending on new mining projects low even before the pandemic, there is growing optimism of a new long-term commodities price rally, with Goldman Sachs predicting a potential repeat of the heady days of the 2000s, when copper rose from $2,000 to more than $10,000 a tonne.
This chatter has given rise to speculation of a new commodities “super-cycle”. Such prolonged highs have occurred at times of huge change, such as the rapid economic growth of the 1960s and 1970s in Europe, America in the 1920s, and during the 2000s in China and the other “BRIC” countries before the global financial crisis put the brakes on.
Jeff Currie, global head of commodity research at Goldman Sachs, argues that forces at play today are similar to those in the mid-1960s and 1970s, creating the bull market.
Efforts to cut income inequality akin to President Johnson’s “war on poverty” in the 1960s should lead to higher consumer spending, while China’s stockpiling of strategic reserves harks back to European and American behaviour in the 1970s, he says.
Efforts to combat climate change, reminiscent of the 1980s fight against acid rain, should trigger a seismic increase in demand in particular for copper and cobalt for wind turbines and electric car batteries. China has announced plans to produce net zero emissions by 2060, while President Biden has re-committed the US to the Paris climate agreement.