In a world devoid of inventory buffers, commodity markets are beginning to experience severe distortions in conventional behaviour. Global markets are having to deal with an extreme molecules crisis across the commodities complex with shortages across energy, metals and agriculture.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that demand destruction remains the only practical mechanism to rebalance exceptionally tight commodity markets in the near-term.
Critically, however, he advocates that once widespread, demand destruction is not a long-term solution with a risk of the permanent structural challenges facing oil and broader commodities – de-globalisation, de-carbonisation, the structural rise demand from low income groups and a reduction in capital availability given structural underinvestments over the years – resurfacing as soon as demand recovers once again.
Ehsan believes this is a decades-long commodities supercycle and we are only in its first innings.
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