As Goldman's Jeff Currie recently warned, commodities are entering a volatility trap.

Crucially, as we detail below, this self-sustaining regime-shift driven by both physical and financial factors, is likely to last years rather than weeks.

'Physically'

Inventories are already at historical lows in terms of 'days of demand' following 20 consecutive months of deficit

Remember, the 'physical' markets have suddenly become significantly more complicated (and delivery anything but guaranteed) as we recently noted 'oil is no longer fungible' to some extent, for some buyers... "Russian oil bidless, non-Russian oil offerless"

'Financially'

Volatility is both curbing liquidity and restricting access to the very credit required to maintain orderly financial and physical trading of commodities.

In addition, it is also exacerbating the medium- to long-term capital shortages that have built up after an era of low returns and ample supply, reinforced by political and investor ESG concerns.