Executive Summary

• The commodity complex is already beginning to rise following oil's upside breakout
• Natural gas is trending higher
• Copper appears to have bottomed
• Wheat and coffee's downtrends are ending
• A secular rise in commodities can happen even in the face of slower economic growth and lower demand

If you have not yet read Part I: Get Ready for Rising Commodity Prices, available free to all readers, please click here to read it first.

In Part I, we examined the conventional narratives used to explain the price of oil and found that they no longer account for oil’s breakout to a new uptrend.  I suggested that financialization and speculation could power oil much higher, despite sagging global demand for physical oil and a potentially deflationary global recession.

This thesis has been met with widespread skepticism when I’ve aired it privately, and I think this skepticism arises from the newness of this narrative. In the past, oil has responded to supply-demand and inflation/deflation. The notion that oil could rise in a finance-induced “scarcity amidst plenty” is neither simple nor intuitive.

If oil tracks higher, we can anticipate that the primary commodities (energy, agricultural, and construction) may well rise, even as end-user demand weakens, as oil underpins all production and transport. The 2.5% rise in producer prices over the past year suggests this is already occurring.