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AS oil touched $88 a barrel on Tuesday October 16th, the temptation was to seek an explanation in geopolitical events. Many cited a potential incursion by Turkish soldiers into northern Iraq. Some believed gold's rise to a new 27-year high was driven by the same factor.

But the commodities market is being affected by a lot more than just events in the Middle East. Raw materials prices are seeing widespread gains. Talk of a “supercycle” is in the air. As of October 15th, copper, lead, soyabeans, wheat, cotton, coffee, cocoa and cattle feed were all showing double-digit percentage gains on the year.

Some of these gains can be traced back to the rise in the oil price. The planned substitution of ethanol for petrol led to a surge in corn planting; that took acreage away from other crops (like soyabeans) and led to a surge in prices. Higher livestock prices can, in turn, be explained by the rising cost of grains.

But the broad strength of commodity prices may also reflect the appeal of the sector as an “alternative asset”, along with hedge funds and private equity. Ever since the dotcom bubble burst, investors have been keen to diversify away from their traditional focus on equities and government bonds. That has led to the launch of a whole series of exchange-traded funds based on commodities, which have made the asset class accessible for a much wider range of investors; the latest example, from Barclays Global Investors, is a fund based on timber prices. And Wall Street has been gearing up to meet demand; a survey by Options Group, a recruitment consultant, found that the hiring rate of commodity traders is up 33% on last year.

The recent credit crunch may have given commodities a further lift. Speculative money that had been flowing into high-yield bonds and structured credit is now looking for a new home. Some commodities, particularly gold, are also seen as a hedge against a declining dollar.

Robin Bhar, a metals strategist at UBS, says investors seem to feel they have an each-way bet on commodity prices. Either global economic growth is strong and supply remains tight, or the world slips into stagflation, as it did in the 1970s. In either case, commodities should perform well.

Such a bet could still lose money, of course, if the world slipped into a non-inflationary recession. But investors seem to feel that the global economy can overcome the problems in the American housing market. Peter Oppenheimer, a strategist at Goldman Sachs, says that high metals prices reflect the strength of the BRICs (Brazil, Russia, India and China) economies, which contribute twice as much as America to global consumption growth.

Individual commodity prices are still highly volatile thanks to speculative demand. A sharp rise tends to attract “momentum” investors who push prices up even further, until the point is reached when end users start looking for alternatives, at which stage the momentum buyers retreat.

But oil's attractions to investors have recently increased because the market has moved into “backwardation”, where futures prices are lower than the current (spot) price. Investors can thus earn a “roll yield” by buying the future and waiting for the price to rise to the spot level.

The key factor, however, is the tightness of supply. Francisco Blanch of Merrill Lynch reckons that supply contracted by 500,000 barrels a day in the third quarter while leading economies entered the current quarter with their lowest stock levels for four years. Mr Blanch reckons it would not take much to push the price to $100 a barrel. If it did, stockmarkets might face an interesting test of confidence.