Copper and oil: will commodity prices continue to rise?

Rising prices and frenetic trading in natural resources in the middle of last year sparked buzz in the investment world. The copper, the ironthe oil and even, timber were affected by it, which caused talk of a possible “super cycle” after the recovery from the pandemic.

According to Renta 4 SAB, the investments that various governments made in infrastructure recovery funds and green energy projects to combat pollution made a boom in raw Materials that it would last several years and that it could increase inflation. The last one was the Petroleum.

“If we look at it from the supply side, this rally could be sustained as high and volatile prices create a huge problem for commodity traders on the supply side. When prices rise, the value of shipments rises, and the need for financing that these merchants may have increases, “said César Romero, Head of Research at Renta4 SAB Peru, in a press release.

For example, in early December, the cost of a typical 2 million barrel cargo of oil was about $140 million. At one point last week, the same cargo was worth nearly $280 million.

From the perspective of demand China, which is one of the main consumers of commodities, the economy is slowing down. Thus, Romero indicated that “currently less growth is seen for the second half of 2021, with downward corrections on the forecast for 2022.”

In addition, the Asian giant has dealt with localized outbreaks of COVID, as well as lower government spending. While these have not badly hit its economy, it has led to a less benign economic climate.

Will the rise continue?

In the long term, the expert indicates, the high price of commodities will continue, particularly that of Petroleum.

“This will catapult inflation, and there is even the possibility of generating an economic recession in the United States, since it overheats the economy by explosively increasing costs,” he said.