In economics, a supercycle refers to an extended period of financial market growth, within which there’s a sustained increase in demand for certain commodities (like oil and gold). How long this period of appreciating prices goes on for depends, but according to the Elliott wave principle (from which the term originates) supercycles tend to last between 40 and 70 years, although sometimes a bit less than this. In fact, in less theoretical terms, supercycles are often seen as those periods which last a decade or longer.
The team here at TriStone Holdings, a prominent UK oil investment company, wanted to look at this financial phenomenon in a bit more detail.
Why Does A Supercycle Occur?
It’s usually reflective of broader global and societal shifts at the time. In the post-war period of the mid-twentieth century, for instance, when companies were looking to rebuild following the huge conflict of WW2, there was a massive demand for raw materials which set the wheels in motion for the supercycle to commence.
More recently, there was the 2000s commodities boom – also known as the 200s commodities supercycle. In this case, the surge in demand was a result of emergent BRIC country markets (Brazil, Russia, India and China) which were growing (in all areas bar geographic…) rapidly. The following commodities were all affected by this boom:
- Oil, Coal, Uranium, Corn, Rice, Wheat, Soybeans, Cocoa, Sulphuric Acid, Gold, Silver, Palladium, Platinum, Aluminium, Copper, Iron, Lead and many, many more…
For a more explicit visualisation of just how drastic these booms can be, let’s look at the price of copper, in particular. During the ‘90s, copper remained around the $2000/ton mark. In the early 2000s? That price broke the $10,000/ton mark…
Recently, following the torrid last year we’ve had as a result of the pandemic, prominent market analysists have begun to question whether we might well be in (or at least approaching) another commodities supercycle, right now.
Are We Approaching A Supercycle Now?
In short, it’s probably too early to say. However, when you’ve got major players like JPMorgan Chase and Goldman Sachs touting that this might well be the start of something big, it’s hard not to take notice. Just as that post-war recovery prompted a supercycle back in the 1950s, commentators are predicting that post-pandemic recovery is going to have a similar impact.
If you pair this with the increasing battle against climate change, the ‘soldiers’ of which (namely the batteries and the clean energy infrastructure) typically require a relatively large quantity of precious metals to put together, then you can see why experts are becoming so excitable. It’s not a certainty, however, not by any means. Because as much as some commodities are seeing increasing demand and prices, others – such as coal – are seeing the exact opposite. So, again, it’s exceedingly difficult to say with any certainty what the future holds for the commodities markets. Will this surge only continue to snowball and gather momentum or will it fizzle out after a few years. It’s certain an interesting time to be speculating on the future of the markets at the minute, particularly when it comes to commodities.
A Look At Oil, In Particular
Rising oil prices have been one of the main reasons experts have been talking about the prospect of a boom (and subsequent supercycle). Indeed, oil prices have been rising recently and rising a lot. In fact, oil prices have risen roughly 70% over the past twelve months which is a pretty meteoric rise in anybody’s books. With both Brent and WTI at over 65$ per barrel (at the time of writing) market bulls have been licking their Wall Street lips. There are even those that believe that the idea of oil prices reaching $100 per barrel aren’t that outrageous.
Whether we’re definitively entering another commodities supercycle or not remains to be seen, however bullish sentiment certainly continues to build indicating the belief is there! So, if you’d like to find out more about our UK oil investment company, then get in touch! Contact TriStone Holdings Ltd today on 0800 055 7079 or by emailing us at [email protected] We’d love to hear from you.