Goldman Sachs was the first one called lithium, "white...

Goldman Sachs was the first one called lithium, "white petroleum"

Goldman Sachs global head of commodities research Jeffrey Currie has reiterated his earlier call saying we are merely at the first innings of a decade-long commodity supercycle.

Goldman Sachs Calls 10-Year Commodity Supercycle
By Alex Kimani - Jan 12, 2022, 7:00 PM CST
While the markets digest the inflation numbers on Wednesday, all eyes will be focussed on the Federal Reserve's reaction to the inflation data. Many economists expected the 7%  gain in the Consumer Price Index, marking a 39-year high. Many markets, including stocks and bitcoin, have come under pressure this year on expectations that the Federal Reserve will likely raise interest rates sooner and more frequently than earlier anticipated.

Experts consider rising inflation one of the biggest market risks this year because runaway inflation could corrode asset values, limit buying power and eat away at corporate margins. In a research note, Goldman Sachs' Jan Hatzius has warned that rapid progress in the U.S. labor market and hawkish signals in minutes from the Dec. 14-15 Federal Open Market Committee suggest faster normalization, with the central bank now likely to raise interest rates four times this year and start its balance sheet runoff process in July, if not earlier.

But the commodities sector is a different beast altogether.

Commodities outperformed other asset classes in 2021 and are widely expected to remain competitive in 2022.

Indeed, Goldman Sachs global head of commodities research Jeffrey Currie has reiterated his earlier call saying we are merely at the first innings of a decade-long commodity supercycle.

Speaking at CNBC's 'Squawk Box' to break down the latest moves in oil prices, Currie says the fundamental setup in the commodities complex, including oil and metals, remains incredibly bullish.

According to the analyst, the oil markets are currently in a big deficit of 2% of global demand, with inventories about 5% below their 5-year moving average. He goes on to say the financial set up offers even more support since fossil fuels remain out of favor with the investing universe while ESG headwinds pose a major challenge for a sector that badly needs new investments if production is to keep up with demand.



It's a point that has been reiterated by UBS analysts, "relative to oil prices, the sector looks cheap. Free cash flow yields are very attractive, capital discipline has improved, and the sector should benefit as demand recovers."