The whipsaw action in commodities during the last month makes gyrations in the stock market look tame. The autumn meltdown created such a risk-averse environment that traders dumped positions across asset classes, including energy and metals. Crude oil prices, for example, declined 75 percent from their peak, only to double off the bottom in December, and a similar story can be said about copper, an important industrial metal. The fate of natural gas has been worse for producers -- a 75 percent decline, but with no accompanying bounce.
Goldman Sachs (GS) believes there's opportunity in this situation, accord to FT Alphaville. As credit markets seized and commodities prices declined, the incentives and ability for major commodity producers to make long-term investments evaporated as well, leaving the same fundamental supply shortages that led to the prior commodities bull market in place for another sustained rally.