Wake up, folks. Commodities are telling you something, and...
Jeffrey Currie 🆔++@CommodMkt
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Aug 22, 2026
~6 min read
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1
Wake up, folks. Commodities are telling you something, and yesterday the Treasury confirmed it.
Scarcity in the physical world. Repression in the financial one.
Scarcity pushes prices up. Repression holds yields down. The gap between them is the debasement.
Commodities are the only asset class that wins on both sides.
The structural case for commodities has been turbo charged. Underinvestment, deglobalization and electrification all pushing markets like diesel cracks and copper to new highs.
Meanwhile the chokepoints are increasing, from Hormuz to the Red Sea, the Rhine, the Panama Canal, the Black Sea grain corridor and Russian refining capacity. It is becoming increasingly apparent that not a single one of those is reachable by anything in Washington's toolkit whether it be caused by war or weather.
The illusion of abundance is likely behind us. I said as much on CNBC this Monday, and I got long gold, silver and agriculture last week.
Ten points for you to consider. (1/11)
Scarcity in the physical world. Repression in the financial one.
Scarcity pushes prices up. Repression holds yields down. The gap between them is the debasement.
Commodities are the only asset class that wins on both sides.
The structural case for commodities has been turbo charged. Underinvestment, deglobalization and electrification all pushing markets like diesel cracks and copper to new highs.
Meanwhile the chokepoints are increasing, from Hormuz to the Red Sea, the Rhine, the Panama Canal, the Black Sea grain corridor and Russian refining capacity. It is becoming increasingly apparent that not a single one of those is reachable by anything in Washington's toolkit whether it be caused by war or weather.
The illusion of abundance is likely behind us. I said as much on CNBC this Monday, and I got long gold, silver and agriculture last week.
Ten points for you to consider. (1/11)
2
I don’t care what you want to call it. A sovereign that has to buy its own bonds to set the price has already conceded that the market won't.
Yesterday Scott Bessent doubled long-bond buybacks, two weeks after publishing the quarterly schedule and one day after the 30-year hit 5.32%. That is a level we’ve not seen since 2007.
But he had little choice: it was the final option in a long list of interventions: first oil, draining the SPR below 300 million barrels to control the term premium, then dollar backstops to keep foreign holders of Treasuries from selling, with Tokyo and the Gulf states in front of the queue.
Then there was FX, selling euros to buy yen for the first time since 1998. Each lever one step closer to the bond market itself.
Now they are buying. The market read it instantly: gold rose 4% to $4,510 within hours, silver nearly 5%, and the Quantix Commodity Index closed at an all-time high. (2/11)
Yesterday Scott Bessent doubled long-bond buybacks, two weeks after publishing the quarterly schedule and one day after the 30-year hit 5.32%. That is a level we’ve not seen since 2007.
But he had little choice: it was the final option in a long list of interventions: first oil, draining the SPR below 300 million barrels to control the term premium, then dollar backstops to keep foreign holders of Treasuries from selling, with Tokyo and the Gulf states in front of the queue.
Then there was FX, selling euros to buy yen for the first time since 1998. Each lever one step closer to the bond market itself.
Now they are buying. The market read it instantly: gold rose 4% to $4,510 within hours, silver nearly 5%, and the Quantix Commodity Index closed at an all-time high. (2/11)
3
Stop looking at crude. Nobody consumes it but refineries.
The economy runs on gasoline and diesel, and that consumption weighted basket costs $165 against $85 WTI.
Breakevens are being priced off the one barrel nobody consumes. The bond market is reading inflation off the wrong screen.
Watch the next three CPI prints. (3/11)
The economy runs on gasoline and diesel, and that consumption weighted basket costs $165 against $85 WTI.
Breakevens are being priced off the one barrel nobody consumes. The bond market is reading inflation off the wrong screen.
Watch the next three CPI prints. (3/11)
4
The diesel crack is the tell.
It settled above $100 a barrel this week for the first time in history, reaching $102.20. That is four to six times its normal range, with records hit in five of the last six sessions.
What lies behind it? A refining shortage. Global runs are down 5 million barrels a day thanks to Ukrainian strikes on Russian plants across its territory, and Iran hitting Middle Eastern plants regularly since the start of the war. Underinvestment leaves no spare capacity.
The raw material is adequate, but the usable product is scarce. That is why crude drifts while products print records. (4/11)
It settled above $100 a barrel this week for the first time in history, reaching $102.20. That is four to six times its normal range, with records hit in five of the last six sessions.
What lies behind it? A refining shortage. Global runs are down 5 million barrels a day thanks to Ukrainian strikes on Russian plants across its territory, and Iran hitting Middle Eastern plants regularly since the start of the war. Underinvestment leaves no spare capacity.
The raw material is adequate, but the usable product is scarce. That is why crude drifts while products print records. (4/11)
5
The Treasury market has a problem: it cannot comfortably clear its own supply. And scarcity only exacerbates the problem.
Foreign holdings fell in June, led by Japan, China and the UK. Against that, you can add a July deficit of $432 billion, interest costs that have surged to $1.1 trillion, a national debt near $40 trillion, and hyperscalers pulling hundreds of billions of AI-capex issuance into the same pool of savings pool of yield seeking dollars.
The marginal yield buyer sits on the sidelines and awaits if yields will clear higher. No buyer of yield wants to catch a falling knife.
Yesterday's buyback is what a failing auction looks like when it is managed rather than admitted. (5/11)
Foreign holdings fell in June, led by Japan, China and the UK. Against that, you can add a July deficit of $432 billion, interest costs that have surged to $1.1 trillion, a national debt near $40 trillion, and hyperscalers pulling hundreds of billions of AI-capex issuance into the same pool of savings pool of yield seeking dollars.
The marginal yield buyer sits on the sidelines and awaits if yields will clear higher. No buyer of yield wants to catch a falling knife.
Yesterday's buyback is what a failing auction looks like when it is managed rather than admitted. (5/11)
6
Repression cuts the brake line.
Normally when such a situation occurs, the bond market disciplines a commodity spike. We are familiar with the cycle: yields rise, demand slows, the spike self-corrects.
But not this time.
The cycle has broken down: scarcity feeds inflation, repression prevents the response, and the absence of a response amplifies the scarcity bid.
The fraction rises from both ends and the mechanism that would pull it back has been disabled. (6/11)
Normally when such a situation occurs, the bond market disciplines a commodity spike. We are familiar with the cycle: yields rise, demand slows, the spike self-corrects.
But not this time.
The cycle has broken down: scarcity feeds inflation, repression prevents the response, and the absence of a response amplifies the scarcity bid.
The fraction rises from both ends and the mechanism that would pull it back has been disabled. (6/11)
7
Every other commodity is dirt plus diesel.
Diesel is the cost base of everything. Every container, every tractor, every locomotive, every
mine truck - you get the idea.
The energy input sets the price floor for metals, grains and fertiliser, which is how QCI prints an all-time high with crude $30 off its peak. Corn is up 10% on the week.
That pass-through will reach into trucking, food and producer prices, and it is barely getting started. (7/11)
Diesel is the cost base of everything. Every container, every tractor, every locomotive, every
mine truck - you get the idea.
The energy input sets the price floor for metals, grains and fertiliser, which is how QCI prints an all-time high with crude $30 off its peak. Corn is up 10% on the week.
That pass-through will reach into trucking, food and producer prices, and it is barely getting started. (7/11)
8
There is no clean bearish resolution.
The market is telling you there are too many barrels of crude and not enough refining capacity.
Either demand will be destroyed through higher product prices, or crude will rebalance (right now we are likely processing a momentary glut from the MoU), or refining capacity will be restored.
One or all of those things will happen.
Should refinery runs recover and refiners bid for 5 million barrels a day of feedstock, the shortage migrates upstream. The result is that crude rallies as cracks compress.
For the consumer, the cost simply shifts between crude and refining, but the overall price stays high.
And there is no policy answer: there simply is no SPR that exists for diesel or gasoline.
Yes, the bears tell you supply is coming, but they have been saying the same thing for over two years. Where is it?
In the meantime, the petroleum index total return has doubled while retail gasoline and diesel prices remain near all-time highs and the number of choke points multiplies. (8/11)
The market is telling you there are too many barrels of crude and not enough refining capacity.
Either demand will be destroyed through higher product prices, or crude will rebalance (right now we are likely processing a momentary glut from the MoU), or refining capacity will be restored.
One or all of those things will happen.
Should refinery runs recover and refiners bid for 5 million barrels a day of feedstock, the shortage migrates upstream. The result is that crude rallies as cracks compress.
For the consumer, the cost simply shifts between crude and refining, but the overall price stays high.
And there is no policy answer: there simply is no SPR that exists for diesel or gasoline.
Yes, the bears tell you supply is coming, but they have been saying the same thing for over two years. Where is it?
In the meantime, the petroleum index total return has doubled while retail gasoline and diesel prices remain near all-time highs and the number of choke points multiplies. (8/11)
9
Whether it is weather or war, the issues are widening and deepening. Hormuz has been constrained for six months and counting. Russian refining is regularly under fire from Ukrainian strikes and there’s no sign of that slowing down. The Red Sea is still a detour.
Record European heatwaves mean that the Rhine is at its lowest since records began in 1880. Panama is down to 47.5 feet of draft.
And now we have the Black Sea grain corridor thrown into the mix: all three Novorossiysk terminals have shut, meaning that 97% of Azov–Black Sea export capacity is offline at the peak of the season, just as the USDA cut the US corn yield to 180.7 and ending stocks 15%.
The world's largest exporter is blockaded and the largest producer got smaller, all in the same month. Food has joined fuel. (9/11)
Record European heatwaves mean that the Rhine is at its lowest since records began in 1880. Panama is down to 47.5 feet of draft.
And now we have the Black Sea grain corridor thrown into the mix: all three Novorossiysk terminals have shut, meaning that 97% of Azov–Black Sea export capacity is offline at the peak of the season, just as the USDA cut the US corn yield to 180.7 and ending stocks 15%.
The world's largest exporter is blockaded and the largest producer got smaller, all in the same month. Food has joined fuel. (9/11)
10
A record El Niño sits behind it all and is waiting in the wings.
NOAA gives it an 81% chance of reaching very strong by year-end. That means a drier Panama Canal, weaker Asian monsoons, and additional stress on Brazil's planting window before the northern crop is in the bin.
Weather has joined the war against a system with no redundancy left: no SPR for diesel, no spare refining, no spare river depth, no spare canal water, no grain corridor.
Every shock goes straight to price. (10/11)
NOAA gives it an 81% chance of reaching very strong by year-end. That means a drier Panama Canal, weaker Asian monsoons, and additional stress on Brazil's planting window before the northern crop is in the bin.
Weather has joined the war against a system with no redundancy left: no SPR for diesel, no spare refining, no spare river depth, no spare canal water, no grain corridor.
Every shock goes straight to price. (10/11)
11
Scarcity is repricing the numerator; repression is debasing the denominator. Own what benefits from both.
The commodity complex carries the scarcity leg - products, grains, freight. Gold carries the debasement leg: $4,510 today against a January record of $5,600, and every incremental intervention closes that gap.
The bond market will spend the next six months discovering what the product markets already know.
Get long and buckle up: the next leg of the ride will see more vol with higher highs across more markets. (11/11)
The commodity complex carries the scarcity leg - products, grains, freight. Gold carries the debasement leg: $4,510 today against a January record of $5,600, and every incremental intervention closes that gap.
The bond market will spend the next six months discovering what the product markets already know.
Get long and buckle up: the next leg of the ride will see more vol with higher highs across more markets. (11/11)
