Is the current oil boom just the start for a commodity run?

Commodities have risen in recent months and have outperformed stock indices in anticipation of an economic recovery, loose monetary policy and rising inflation. The broad-based commodity bull market - led by a 50 percent rise in oil prices over the past three months - is not over yet, analysts and investment banks say. Some of the largest investment banks have even begun to proclaim the start of a new commodity super cycle that, by definition, will take years - typically around a decade. But not all investment banks and analysts are so convinced that we are facing a commodity super cycle. They warn that the term supercycle is too optimistic about a bull market that could fizzle out in a year or two and still fall victim to negative COVID-related effects. Back in October 2020, a few weeks before an effective vaccine candidate was first announced, Goldman Sachs said raw materials would be heading for a bull run in 2021. Hedges against rising inflation expectations, a weakening US dollar, in which most commodities are traded, and signals of a "very loose" monetary policy from central banks would be the main drivers of a commodities rally, according to Goldman Sachs at the time. Goldman expected the S&P Goldman Sachs Commodity Index (GSCI) to return 42.6 percent for energy over a 12-month period and 17.9 percent for precious metals. In the past three months, the S&P GSCI has outperformed the S&P 500. The commodities index rose by 25 percent, while the S&P 500 gained (only) 9 percent. Over the same period, oil prices rose from the low $ 40 to over $ 60 a barrel, fueled by the introduction of vaccines, OPEC + production cuts, and expectations of tight market and rising demand for oil later this year when economies were given major stimulus packages grow again.