Wall Street Sounds the Alarm: A Commodity Storm Is Coming!

In the era of globalization, production occurs where resource costs are lowest; goods are shipped to where demand is greatest; and inventories are shared globally—surplus regions supply shortages. The world relies on low-cost cross-border logistics, free trade, and transnational investment to smooth out supply gaps and suppress commodity prices. Today, however, trade barriers, export controls, and localization of critical minerals have become the norm. The U.S., Europe, China, and Japan have all formulated their own critical mineral strategies—security, controllability, and self-reliance have replaced efficiency as top priorities. Policy uncertainty across countries has risen sharply. Western nations have already seized Russian assets and repeatedly used pretexts to expropriate Chinese investments. Mining and oil companies now hesitate to commit large-scale, long-term capital expenditures; cross-border investment has grown exceptionally cautious. Insufficient new capacity means inadequate buffers—and markets have grown increasingly sensitive: even minor shocks trigger violent price swings. Supply chains are being forcibly restructured with built-in redundancy, pushing up costs across the entire value chain—and demanding more physical commodities. Meanwhile, the African Union plans to establish a mineral resources alliance; four Latin American countries aim to form a copper-and-lithium alliance; and multiple nations are simultaneously implementing policies such as mandatory state ownership stakes, bans on raw mineral exports, and quota reductions—raising repeated red flags over the stable supply of physical resources! Geopolitical wars detonate bombs: If deglobalization is a slow knife—gradually eroding supply resilience while boosting physical demand—then geopolitical conflict is the fuse that directly triggers ‘black swan’ explosions disrupting production and transportation. A U.S.-Iran war would block the Strait of Hormuz—not only the world’s energy chokepoint, controlling 25% of global seaborne oil trade and 20% of LNG shipments, but also holding sway over 32% of global ammonia supply, 33% of seaborne urea, 45% of global sulfur exports, 31–45% of seaborne methanol, 25% of polyethylene/polypropylene, 50% of diammonium phosphate (DAP) and compound fertilizers, 30% of naphtha, and 11.8% of global electrolytic aluminum. Such a blockade would instantly reshape the supply-demand balance for numerous commodities! Moreover, the ‘splash damage’ from these ‘black swan bombs’ is enormous. Houthi militants in Yemen have blockaded Saudi Arabia via the Red Sea; the Russia-Ukraine war has likewise shifted tactics—Ukraine uses long-range drones to strike Russian refineries and logistics hubs, while Russia blocks Ukrainian ports, halting grain exports. Refineries in the Middle East and Ukraine continue to be bombed, straining global refining capacity and sending refined product margins soaring! Goldman Sachs estimates current global refinery shutdowns exceed seasonal averages by 60%. The American Petroleum Institute calculates roughly 5 million barrels per day of crude processing capacity lost globally—about 5% of total global refining capacity. On September 1, U.S. diesel refining margins (the diesel crack spread) approached $107 per barrel—the highest on record. This figure normally stands around $20–$30. President Trump urgently convened major refiners at the White House, pledging environmental waivers for small refineries and urging expanded capacity. Ocean freight runs on diesel; long-haul road transport burns diesel; agricultural and industrial machinery rely on diesel; and winter heating depends on diesel too! Even the production and transportation of commodities—and energy itself—depend critically on diesel. For example, reduced Russian diesel exports have left Mongolia short of diesel, preventing coking coal transport to China—and triggering a sharp rise in coking coal prices. Soaring diesel costs inevitably push up energy, mining, and agricultural commodity costs!

After Studying Long-Term Cycles for Over Half a Year, Here Are My Four Core Judgments for the Next Two Years

We compared the oil price curve from July 1973 with that from January 2001—a 27.5-year interval—and found an excellent alignment. This comparison reveals that current oil prices stand at the early stage of a structural bull market. Even without considering the accidental closure of the Strait of Hormuz, oil itself is rapidly approaching a pivotal inflection point marked by a substantial supply-demand gap. Based on our prior inventory-cycle analysis, the third inventory cycle will begin in March 2027. Strong evidence suggests that from March 2027 to January 2028—the upward phase of the third inventory cycle叠加 (overlapping) with the upward phase of the capacity cycle—will exert positive upward pressure on oil prices. Even the price floor following the third inventory cycle’s downturn should lie above the bottom range established in January 2026—thereby providing theoretical support, grounded in underlying commodity prices, for our earlier expectation of stagflationary stagnation during this cycle. Source: World Bank Commodity Price Data & FRED WTI; compiled by Xiang Xin Er Sheng. Because crude oil is the ‘mother of industry,’ it serves not only as energy but also as the ‘ultimate cost item’ for all industrial goods. Unlike industrial metals—which follow distinct cyclical logic—oil price surges at cycle peaks instantly elevate society’s logistics and manufacturing costs, triggering vicious inflation. The entire Kondratiev (‘Kondratiev Wave’) depression phase must conclude with a deflationary bust following a period of stagflation. Stagflation refers to inflation accelerating faster than economic growth. Taking the last Kondratiev depression as an example—centered on the U.S. as the hegemon—the depression spanned roughly 1972–1982, featuring two stagflation episodes accompanied by two oil crises. This round of depression began in September 2020. It has already undergone its first stagflation-driven correction post-COVID-19, and is now entering the initial phase of a second inflationary uptick. In my view, inflation will only truly emerge as a tradable theme during the third inventory cycle—starting March 2027—making this one key reason I believe gold still has one final upward leg ahead. Source: Federal Reserve Bank of Dallas; compiled by Xiang Xin Er Sheng. Source: Federal Reserve Bank of Dallas; compiled by Xiang Xin Er Sheng. Another micro-level factor driving energy prices higher, in my view, is climate catalysis. Historical oil price comparison charts show strong parallels between today’s trajectory and those of 1998–1999 and 1972–1973. Historically, El Niño events have often coincided with oil price spikes. Our table extracts five instances when the Southern Oscillation Index (SOI) remained below −7 for over seven months within a single year—and finds a very strong positive correlation between such prolonged SOI extremes and subsequent oil price increases. The primary driver is heightened energy demand under extreme climatic conditions. ‘Historical data shows that the winter of 1976–1977 in the U.S. was exceptionally cold—causing energy prices to surge dramatically. At the same time, persistently fixed wellhead prices and excessive regulation of interstate natural gas markets dampened producers’ incentives—leading to a natural gas shortage in northern U.S. states, which relied heavily on imported gas.’

El Niño to Affect US Winter Weather, Impacting Energy and Chemical Feedstocks

1 day ago

NOAA forecasts a strong El Niño bringing warmer northern temperatures and wetter southern conditions this winter. This outlook impacts the chemicals industry by influencing natural gas prices, which serve as a price floor for ethane feedstock.

icis

2026-10-15

El Niño to Affect US Winter Weather, Impacting Energy and Chemical Feedstocks

El Niño to Affect US Winter Weather, Impacting Energy and Chemical Feedstocks

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