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Europe’s Green Deal will transform its economy, as floods confirm urgency of tackling climate change

The floods raging in Germany and Benelux highlight the scale of the Climate Change challenge ahead.  Last week, Europe announced its roadmap towards a Net Zero economy.  It emphasised that achieving Net Zero, even by 2050, will be impossible if we don’t start now. As the Commission noted in presenting the strategy: “Climate change is

The post Europe’s Green Deal will transform its economy, as floods confirm urgency of tackling climate change appeared first on Chemicals and the Economy.

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Oil markets enter the endgame as car companies rush to electrify

Almost every day now sees a car company rushing to announce its plans to boost Electric Vehicle (EV) output. And key OPEC members – such as the UAE – are starting to recognise they have only a few years left to sell their oil, before the market disappears. Last May, the influential International Energy Agency

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“When all the experts and forecasts agree — something else is going to happen”, Bob Farrell

At the beginning of the year, “everyone knew” that inflation was about to take off, and that the US$ was going to collapse. Last week, the great Bob Farrell’s Rule No 9 proved its worth, yet again. US interest rates fell sharply and the US$ bottomed for this cycle. The two charts above tell the

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Supply chains set to transform as companies start to reshore

Major new opportunities are starting to appear in today’s New Normal world, as I describe in a new analysis for the Institution of Chemical Engineers. Please click here to read the full article. We are set to enter a “New Normal” world as economies slowly reopen again with the arrival of Covid-19 vaccines. This will

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Weak demand – and the illusion of a return to “normal”

My new interview with Real Vision focuses on the major changes underway in the economy. Our analysis of the chemical industry, auto market, and technology sector, suggests a return to the “old normal” is highly unlikely. Instead, major changes are underway in Demand Patterns, Reshoring, Energy Abundance, the Circular Economy and in Advanced Manufacturing.  For

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Iran highlights OPEC’s dilemma on output cuts

Saying you “won’t do something” may stop you digging a bigger hole for yourself. But it doesn’t help in deciding what you should do instead. That’s OPEC’s dilemma today on raising oil output. Everything seemed simple enough a year ago, as the pandemic took hold: Saudi Arabia’s first reaction was to assume it would have

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5 key questions for success in the New Normal

Sustainability rather than globalisation is becoming the key driver for business. And the paradigm shift this creates means that companies need to adopt new Critical Success Factors as shown above. Leadership skills will be essential at all levels of the organisation in order to stimulate the creativity and action orientation required for success. There are

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Look for Winners and Losers in 2021

“There are decades where nothing happens; and there are weeks where decades happen”. Lenin’s famous insight was highly relevant to 2020. It was full of such weeks as the coronavirus pandemic became a catalyst for major paradigm shifts in the economy. Of course, some sceptics still expect a quick V-shaped return to ‘business as usual’,

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OPEC set to lose out as Biden, EU and China focus on Climate Change opportunities

OPEC used to dominate global oil markets. In the early 1980s, there was even talk of another OPEC cartel to control gas prices. But those days are long gone.  Instead OPEC members such as the UAE are increasingly aware they have only a limited time left to monetise their vast reserves of fossil fuels. This is

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Oil prices signal potential end to the V-shaped recovery myth

Oil prices have moved into another ‘flag shape’ – which previously provided critical warning of the March collapse, and of those in 2014 and 2008. The shape is important as it means the bulls and bears have been battling each other to exhaustion, making it likely one or the other will give up. This time,

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Bankruptcies now the key risk as hopes for V-shaped recovery disappear

Governments, financial markets and central banks all originally assumed the Covid-19 pandemic would be over in a few days or weeks. But it is now clear they were wrong. And unfortunately, there is little sign of a Plan B emerging. The idea was that consumers would have plenty of money in their pockets after the

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The Top 5 pandemic paradigm shifts

The Covid-19 pandemic has accelerated the fundamental changes which were already underway in global markets, as I discuss in a new interview with Will Beacham of I.C.I.S. Companies and investors need to focus on the challenges and opportunities created by 5 major paradigm shifts as we move into the New Normal. These will impact individual

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Oil prices start to reconnect with coal and gas

Oil prices are finally starting to reconnect with other fossil fuel prices, as the chart shows.  It compares US WTI prices in terms of $/MMBtu value (WTI/5.8), versus US natural gas and coal prices: In January 1990, WTI was $3.94 versus natgas at $2.30 and coal at $1.45 (all $/MMBtu) In January 2000, WTI was

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China’s lockdown makes global debt crisis now almost certain

Beijing has a population of 21.5 million, but you wouldn’t know it from this BBC video from last Thursday.  Normally busy streets and transport systems are eerily empty, with food deliveries often the main traffic on the roads. It’s the same picture in industry, with the Baidu Migration Index reporting only 26% of migrant workers

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Polyethylene’s crisis will create Winners and Losers

Polyethylene markets (PE) are moving into a crisis, with margins in NE Asia already negative, as I have been forecasting.  Scenario planning is now a matter of potential life or death for companies likely to be impacted over the next 12-18 months. The collapse in margins is already quite dramatic as the chart based on

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Oil market weakness suggests recession now more likely than Middle East war

Oil markets remain poised between fear of recession and fear of a US attack on Iran. But gradually it seems that fears about a war are reducing, whilst President Trump’s decision to ramp up the trade war with China makes recession far more likely. The chart of Brent prices captures the current uncertainties: It shows

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Recession risk rises as Iran tensions and US-China trade war build

Oil markets are once again uneasily balanced between two completely different outcomes – and one again involves Iran. Back in the summer of 2008, markets were dominated by the potential for an Israeli attack on Iranian nuclear facilities, as I summarised at the time: “Nothing is certain in life, except death and taxes. But it

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Déjà vu all over again for oil markets as recession risks rise

Back in 2015, veteran Saudi Oil Minister Ali  Naimi was very clear about Saudi’s need to adopt a market share-based pricing policy: “Saudi Arabia cut output in 1980s to support prices. I was responsible for production at Aramco at that time, and I saw how prices fell, so we lost on output and on prices

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Asian downturn worsens, bringing global recession nearer

The chemical industry is the best leading indicator for the global economy.  And my visit to Singapore last week confirmed that the downturn underway in the Asian market creates major risks for developed and emerging economies alike. The problem is focused on China’s likely move into recession, now its stimulus policies are finally being unwound. 

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Chemical output signals trouble for global economy

A petrochemical plant on the outskirts of Shanghai. Chinese chemical industry production has been negative on a year-to-date basis since February Falling output in China and slowing growth globally suggest difficult years ahead, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Chemicals are the best leading indicator for the

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Oil prices flag recession risk as Iranian geopolitical tensions rise

Today, we have “lies, fake news and statistics” rather than the old phrase “lies, damned lies and statistics”. But the general principle is still the same.  Cynical players simply focus on the numbers that promote their argument, and ignore or challenge everything else. The easiest way for them to manipulate the statistics is to ignore […]

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Chemicals flag rising risk of synchronised global slowdown

Chemicals are easily the best leading indicator for the global economy.  And if the global economy was really in recovery mode, as policymakers believe, then the chemical industry would be the first to know – because of its early position in the value chain. Instead, it has a different message as the chart confirms: It […]

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Saudi oil policy risks creating perfect storm for Aramco flotation

Good business strategies generally create good investments over the longer term. And so Aramco needs to ensure it has the best possible strategies, if it wants to maximise the outcome from its planned $2tn flotation. Unfortunately, the current oil price strategy seems more likely to damage its valuation, by being based on 3 questionable assumptions: Oil […]

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China’s role in market volatility – Beijing’s shifting priorities raise questions over assumptions of global growth

Commentators have confused cause with effect when analysing this month’s sudden downturn in financial markets, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Surprise and confusion seem to have been the main reactions to this month’s sudden downturn in western financial markets. Yet across the world in […]

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Economy faces slowdown as oil/commodity prices slide

Oil and commodity markets long ago lost contact with the real world of supply and demand. Instead, they have been dominated by financial speculation, fuelled by the vast amounts of liquidity pumped out by the central banks.  The chart above from John Kemp at Reuters gives the speculative positioning in the oil complex as published […]

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The global economy and the US$ – an alternative view

Every New Year starts with optimism about the global economy.  But as Stanley Fischer, then vice chair of the US Federal Reserve, noted back in August 2014:  “Year after year we have had to explain from mid-year on why the global growth rate has been lower than predicted as little as two quarters back.” Will […]

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The return of volatility is the key market risk for 2018

We are living in a strange world. As in 2007 – 2008, financial news continues to be euphoric, yet the general news is increasingly gloomy. As Nobel Prizewinner Richard Thaler, has warned, “We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.” Both views […]

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Saudi Arabia’s ‘Vision 2030’ is looking a lot less clear

Saudi Arabia’s U-turn to revive oil output quotas is not working and fails to address the changing future of oil demand, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Saudi Arabia’s move into recession comes at an unfortunate time for its new Crown Prince, Mohammed bin Salman […]

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Budgeting for the Great Unknown in 2018 – 2020

“There isn’t anybody who knows what is going to happen in the next 12 months.  We’ve never been here before.  Things are out of control.  I have never seen a situation like it.“ This comment from former UK Finance Minister, Ken Clarke, aptly summarises the uncertainty facing companies, investors and individuals as we look ahead […]

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Oil heads back below $30/bbl as hedge funds give up on OPEC

“Those who cannot remember the past are condemned to repeat it“. George Santayana 9 months ago, it must have seemed such a good idea.  Ed Morse of Citi and other oil market analysts were calling the hedge funds with a sure-fire winning strategy, as the Wall Street Journal reported in May: “Dozens of hedge-fund managers […]

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“Exponentially rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways”

Companies and investors have some big decisions ahead of them as we start the second half of the year.  They can be summed up in one super-critical question: “Do they believe that global reflation is finally now underway?” The arguments in favour of this analysis were given last week by European Central Bank President, Mario Draghi: […]

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Oil price weakness will unmask reflation and recovery myth

Oil markets have been at the centre of the recent myth that economic recovery was finally underway.  The theory was that rising inflation, caused by rising oil prices, meant consumer demand was increasing.  In turn, this meant that the central banks had finally achieved their aim of restoring economic growth via their zero interest rate […]

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Metastable markets at risk from impact of US, UK political stalemate

We are living in very uncertain times, where the only certainty is that there is no “business as usual” option for the future.  One sign of this is that the extraordinary has become ordinary : □   The FBI appear convinced Russia’s government targeted last year’s US elections: US President Trump and his former FBI head […]

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Sinopec’s results confirm China’s focus on employment and self-sufficiency, not profit

China’s strategies for oil, refining and petrochemical production are very different from those in the West, as analysis of Sinopec’s Annual and 20-F Reports confirms.  As the above chart shows, it doesn’t aim to maximise profit: □  Since 1998, it has spent $45bn on capex in the refining sector, and $38bn in the chemicals sector □ […]

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Oil prices under pressure as US oil/product exports ramp up

On Monday, I discussed how OPEC abandoned Saudi Oil Minister Naimi’s market share strategy during H2 last year. Naimi’s strategy had stopped the necessary investment being made to properly exploit the new US shale discoveries. But this changed as the OPEC/non-OPEC countries began to talk prices up to $50/bbl. As CNN reported last week: “Cash is pouring […]

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US Permian’s shale oil surge highlights OPEC’s failed strategy

OPEC and Russia made a massive mistake last November when when they decided to try and establish a $50/bbl floor for world oil prices.  And now they have doubled down on their mistake by extending the deal to March 2018. They have ignored 4 absolutely critical facts:   Major US shale oil producers were already […]

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Oil market rebalancing myth looks close to its sell-by date

The myth of oil market rebalancing has been a great money-maker for financial markets.  Hedge funds were the first to benefit in H2 last year, as Reuters has reported, when: “OPEC and some of the most important hedge funds active in commodities reached an understanding on oil market rebalancing during informal briefings held in the […]

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Oil prices could halve as the speculative bubble starts to burst

The past few weeks have been a nightmare for the many hedge funds who gambled on higher oil prices. They obviously hadn’t realised that OPEC’s November quota agreement was most unlikely to lead to a major rebalancing of today’s vastly over-supplied market.  But as I suggested in December: “The simple fact is that the arrival […]

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Speculators’ tail wags oil market dog as paper trading dominates

Trading oil markets used to be hard work. You had to talk to all the major players all the time (not just message them), and learn to judge whether they were telling the truth or inventing a version of it.  You had to watch for breaking economic and political news.  And you needed your own […]

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Trump and dollar strength will accelerate the Great Reckoning

Corporate debt in the Emerging Markets highlights the impact of the Great Reckoning, with the US dollar and interest rates rising, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Corporate borrowers in Emerging Markets (EMs) are now facing higher debt service and capital repayment costs, due to […]

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Chart of the Year: US$, 10-year US interest rates begin to rise

Last year it was the oil price fall.  This year, there is no doubt that the US dollar has taken centre stage, alongside the major rise underway in benchmark 10-year interest rates.  As 2016′s Chart of the Year shows:   The US$ Index (black) has risen 12% since May against other major currencies (euro, yen, […]

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3 key questions for the oil market poker game, ahead of OPEC’s meeting

Volatility continues to dominate oil markets, as the above chart confirms.  Some weeks have seen prices move by over 18%.  These are extraordinary moves in a market which is very well supplied, with near-record inventory levels.  Some recent daily moves are equally extraordinary, with prices jumping $2.50/bbl on Tuesday. The volatility highlights the power of […]

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ExxonMobil, Saudi Arabia, differ on oil outlook – or do they?

If asked about the outlook for prices, oil company CEOs normally duck the question.  And they certainly never disagree in public with Saudi Arabia, the world’s leading oil producer.  This is what makes the recent speech by ExxonMobil CEO, Rex Tillerson, so interesting: “I don’t quite share the same view that others have that we are somehow […]

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6 impossible things not to believe about oil before breakfast

 ”Sometimes I’ve believed as many as six impossible things before breakfast.” Oil traders know how the Queen felt in Lewis Carroll’s famous book, Alice Through the Looking-Glass.  The list of impossible things that they are being asked to believe grows almost by the day:   Last week, prices jumped 4% on the basis that strong […]

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You’ve seen the Great Unwinding; get ready for the Great Reckoning

Companies and investors now need to prepare for the Great Reckoning, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog We have reached the second anniversary of the Great Unwinding of policymaker stimulus. Almost inevitably, this now seems likely to be followed by a Great Reckoning, a consequence […]

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Lack of affordability limits gasoline demand growth

How much of your day’s wage does it cost you to buy a US gallon of gasoline?  This chart from Bloomberg shows the answer for 61 countries, based on prices for 95 octane grade at the end of Q2:   Bankrupt Venezuela is most affordable at 1% of a day’s income (based on GDP/capita)  […]

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Oil heads back to $30/bbl and probably lower

There was never any fundamental reason why oil prices should have doubled between January and June this year. There were no physical shortages of product, or long-term outages at key producers. But of course, there was never any fundamental reason for prices to treble between 2009 – 2011 in the Stimulus rally, or to jump […]

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Auto sales and the oil price: the Great Unwinding continues

Serious questions need to be asked about the likely level of future demand growth for oil and auto sales in Emerging Markets (EMs), as I describe in my latest post for the Financial Times, published on the BeyondBrics blog  Oil market volatility has reached near-record levels in H1 this year, as the first chart shows. […]

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Europe’s oil product glut halves gasoline margins in 2 weeks

We are approaching the 2nd anniversary of the Great Unwinding of policymaker stimulus, which began in August 2014: The initial movement was very sharp, with Brent falling 53% by January and the US$ rising 23% by March Oil then saw an initial correction – with Brent recovering to being 37% down by May during the “oil […]

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Oil price volatility highlights uncertainty ahead

  The 3 month trend of Brent oil price volatility has reached its highest level since the 2008 financial crisis and before that, the 1st Gulf War in 1990/91.  As the chart shows, it is even higher than after 9/11. Yet there have been no developments in oil markets themselves to justify such a level. […]

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Brexit a disaster for the UK, Europe and the world

First, the good news.  It has long been recognised that the UK economy is over-dependent on financial services, and that its housing market – particularly in London – is wildly over-priced in relation to earnings.  The Brexit vote should ensure that both these problems are solved: Many banks and financial institutions are already planning to […]

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Clouds gather over global polymer markets as China imports drop

Difficult times lie ahead for global polymer markets.  It would be bad enough that downstream users have been busy building stock in recent weeks as the oil price rose, as Linda Naylor reports on polypropylene (PP) for ICIS: “PP demand is slow, slower than many expected, and the strong growth of recent months is now […]

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Oil market fundamentals continue to weaken as Glencore buys

Global oil traders are having lots of fun as oil market volatility ramps up.  Earlier this month, for example, Reuters reported that “Glencore have got big positions all over the place” in North Sea oil markets: They spotted that N Sea production would be sharply reduced in June due to maintenance on the Ekofisk field […]

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Naimi finally allowed to retire, Saudi oil policy stays the same

81-year olds are allowed to retire, even if they have to wait a year for final permission to be given.  But it seems a simple headline saying “Saudi Oil Minister retires after 69 year career” is not “exciting” enough in today’s media world?  So perhaps we can’t be too surprised to find some of the world’s […]

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China’s G20 Summit shutdown highlights risks to buying “frenzy” in commodities markets

China’s polyester industry, like many others, is already preparing to shut down ahead of September’s G20 Summit in Hangzhou, to reduce pollution levels.  The phenomenon even has its own Wikipedia page, APEC Blue, to describe the moment in November 2014 when Beijing suddenly saw blue sky for the whole of the Asia-Pacific Economic Co-operation (APEC) summit meeting.  It […]

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Saudi plans to transform Aramco to energy /industrial company

“Within 20 years, we will be an economy that doesn’t depend mainly on oil“. With that one statement, deputy Crown Prince Mohammed bin Salman (pictured above), changed the outlook for oil and energy markets.  The world’s major oil producer, with the lowest cost, was signalling that the kingdom will no longer be supply-driven, focused on […]

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Chemicals, the “flea on the tail of the currency/interest rate dog”

Markets are becoming increasingly chaotic, as the world’s major central banks each try to devalue their currencies. They have created a traders’ paradise, with oil on a particularly wild ride.  But this has not been based on supply/demand fundamentals.  Instead, it has been due to hedge funds jumping back into the commodities market. They don’t […]

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Oil market rally under threat as Doha meeting fails to agree

Yesterday’s failure of the Doha oil producers meeting will hopefully reintroduce a note of sanity into oil markets.  After all, Saudi leaders have made it clear, time and time again, that they were no longer interested in operating a cartel where they take the pain of cutting production, and everyone else gains the benefit of […]

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US GDP Q1 forecast at just 0.1%; global chemical output slows

“Confusion now hath made his masterpiece”.  This quotation from Shakespeare’s great tragedy, Macbeth, aptly sums up the state of the world economy. Policymakers refuse to accept that the BabyBoomer-led economic SuperCycle is over.  And so they continue to believe that adding vast amounts of electronic money to the financial system will return the economy to SuperCycle levels […]

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Hedge funds exit oil price rally as Saudi plans post-oil economy

“Within 20 years, we will be an economy or state that doesn’t depend mainly on oil“. This critical statement from Saudi Arabia’s deputy Crown Prince has been lost in the hype surrounding Q1′s hedge fund-inspired rally in oil, commodities and Emerging Markets.  There has seldom been a better example of markets failing to see the […]

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Oil market speculators profit as central banks hand out free cash

Oil markets are entering a very dangerous phase.  Already, many US energy companies have gone bankrupt, having believed that $100/bbl prices would justify their drilling costs.  Now the pain is moving downstream. The problem is the central banks.  Hedge funds have piled into the oil futures markets since January, betting that there would be lots […]

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China’s rising exports: less about growth, more about exporting deflation

China’s move towards self-sufficiency is radically changing global oil and petrochemical markets,as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Markets used to cheer when China’s exports rose, believing this showed the global economy was in good shape. They are still hopeful today, despite the 25 per cent fall in February’s […]

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Prepare for $10-$15/bbl oil as Iran, US return to the market

Oil markets finally entered their “give-up phase” last week.  Amazingly, it is now nearly 18 months since the start of the Great Unwinding of policymaker stimulus in August 2014, when Brent was still $105/bbl.  On Friday night Brent closed at $29/bbl.  As ICIS Chemical Business (ICB) notes in its latest editorial: “International eChem’s Paul Hodges […]

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Oil hits $30/bbl – and suddenly, analysts forecast lower prices

Yesterday, oil prices reached my long-held $30/bbl forecast level.  And suddenly, it seems, all the leading analysts have begun to forecast lower oil prices.  As Reuters reported: “Adjusting to the price rout, analysts have been shifting their price outlooks downward, with Barclays, Macquarie, Bank of America Merrill Lynch, Standard Chartered and Societe Generale all cutting […]

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Expect $25 – $30/bbl oil and lower chemical prices in 2016

More than $2.3tn was wiped off the value of global stocks last week as China’s slowing economy and currency depreciations spooked investors around the world, leading to the worst start to a year for markets in at least two decades.  This is the Great Unwinding of policymaker stimulus in action. Worse is likely to come. […]

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Financial markets feel impact of the Great Unwinding

Its not been a great start to the year for those who have trusted in conventional wisdom: Western stock markets have been reeling, with the US S&P 500 Index down sharply since Monday It has been the worst opening for world stock markets since 2008 – not a good year for investors China’s currency has […]

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Chart of the Year – Oil prices return to natural gas linkage

Last year’s ‘Chart of the Year’ was headlined “China’s auto sales bubble begins to burst“.  Few would disagree with this view today.  Similarly, there is little doubt about 2015′s Chart of the Year.  It has been the focus of industry and analyst attention all year: Those who believed that argument that the world faces an […]

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US, Iran to sell oil in January as Libya ramps up volumes

Both the US and Iran are likely to be moving oil into world markets early in the New Year. The lifting of the US export ban has led to early announcements of oil sales: Vitol will move the first cargo via the Enterprise terminal in Houston in early January.  Iran is expecting to have sanctions lifted around the same […]

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$25/bbl oil – probably now only a question of “when”, not “if”

Oil prices are just $1 or so away from falling back into the $10 – $35/bbl range that has dominated most of history. Thus we are now reaching a second critical moment in oil markets since Stimulus began in 2009, as the chart shows: The first was the end of the Stimulus rally which ran […]

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US 10-year interest rates jump 23% as Fed debates 0.25% hike

Media hype over the potential for a 0.25% interest rate rise by the US Federal Reserve is well underway.  But as often happens these days, this is missing the bigger picture. The issue is simple: developments in China are far more important to the global economy than anything the Fed might, or might not, do […]

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Group think on oil prices puts company profits at risk

Shell Chemicals General Manager, Kate Johnson, asked a great question at our Conference last week, to which not a single hand went up in reply, as everyone had forecast an oil price around $100/bbl : “How many of your companies used $60/bbl as their oil price forecast in the 2015 Budget?” “Group think” is clearly […]

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Oil price forecasts based on myths, not proper analysis

Did your company or investment manager use $50/bbl as a forecast Scenario price for oil this year?  If not, why not?  And has this question even been asked, as you finalise forecasts for 2016? In recent months, many readers have told me despairingly of their efforts to suggest alternative Scenarios to last year’s “consensus” view […]

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Algorithms drive oil prices up 6%, yet fundamentals remain weak

It only took 2 days for a shocking example to confirm my concern on Monday about the volatility being created by central bank stimulus: As the Wall Street Journal (WSJ) chart shows, a major oil price move took place early in Wednesday’s trading US WTI oil had been trading below $44/bbl, when suddenly prices jumped from […]

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5 Critical Questions every Company and Investor Need to Answer

Today’s uncertain economic and oil price  environment has created chaos in petrochemical feedstock and product markets.  This creates major risks for producers, consumers and investors. ICIS and International eChem have therefore decided to combine our resources to launch a new Study, that will analyse the potential impact of these developments on the olefins, aromatics and […]

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Oil stocks at record levels as demand growth slows, supply rises

OECD oil inventories have never been higher.  They were 2.9mb at the end of July, and are expected to have risen further since then, according to energy watchdog the International Energy Agency: In terms of days of forward cover, they are now at 63 days in the OECD overall They are at 68 days in […]

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Impact of $25/bbl oil – free pH Report webinar next Tuesday

The consensus failed to forecast last year’s oil price collapse.  So is today’s conventional wisdom correct to suggest that prices will now stabilise at current levels and then move higher? We focus on this critical issue in this quarter’s free webinar from The pH Report: The potential for $25/bbl to be the “new normal” for […]

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Stock market volatility surges as margin debt hits danger level

Global stock markets turned in a vintage experience last week for those who like horror movies. Continued sell-offs in China finally convinced some financial investors, and some senior Western policymakers, that its economy might not be quite as strong as they had assumed.  The ensuing panic led to record profits for the high frequency traders (HFTs), as the Dow Jones […]

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Contagion hits financial markets as Great Unwinding continues

Crude oil prices continued to fall towards $30/bbl last week.  Markets are finally starting to recognise, as the BBC reported last year, that ‘China fooled the world‘ with its stimulus programme. It had not suddenly become middle-class by Western standards in 2009.  Instead, aided by developed country stimulus policies, its own stimulus had helped create […]

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Phase 2 of the Great Unwinding of policymaker stimulus begins

Greece, Iran, China – suddenly real world issues are starting to dominate the headlines.  And few people now believe that printing more money is the way to solve these issues.  Instead, political leaders are being forced to take the hard decisions they have ducked for so long. Financial markets are clearly reflecting the change.  They […]

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US Marcellus gas output trebles as drilling rig count halves

Simple stories aren’t always true.  That’s certainly the case with the fiction that the fall in the number of US oil drilling rigs will soon reduce US oil production. Exxon Mobil CEO Rex Tillerson recently reminded us of this critical point: “Clearly a significant decline in rig activity did not diminish the continued growth of […]

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OPEC hit as ‘peak oil demand’ arrives and US imports fall

Oil market traders have been having fun in recent weeks, as they have managed to create guaranteed price movements every week: US oil inventory data is published on Tuesday and Wednesday This gives traders the chance to push prices lower as the inventories continue to rise US oil rig data is published on Friday This creates the chance to […]

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Lower oil prices support European cracker operating rates

Who would have believed, a few years ago, that European cracker operators would see an operating rate of 84% as something to celebrate?  It would have been thought a disaster prior to 2008, when rates typically ranged around 90%. But whilst nobody is flying flags, last year was the best year since 2007.  And as […]

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Volatility rises as central bank policies prove wishful thinking

Q1 was very difficult for many companies and investors.  They had wanted to believe since 2009 that central banks could somehow control the global economy: The oil price would always be $100/bbl The US $ would always remain weak Central banks would always be able to stimulate growth in the economy Stock markets would always go up in the […]

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Executives struggle to keep up as volatility rises with Great Unwinding

It is looking more and more likely that the global economy hit a peak in Q2 last year, and has since been slowing.  Latest data on chemical production from the American Chemistry Council indicates a further slowdown so far this year, as the chart shows: Global production slowed to 2.8% in February from a 5% peak […]

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Hedge funds moving away from ‘buy on the dips’ strategy

In recent years, financial markets have believed that “everything is for the best in this best of all possible worlds“.  Good news has taken markets higher.  So has bad news – as investors assume policymakers will apply more stimulus. As a result, a whole generation of managers and analysts has grown up without having to learn the fundamentals of supply/demand analysis.  And […]

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Oil price, China Outlook – free pH Report webinar tomorrow

There have so far been 3 stages to the oil price collapse since I first forecast this development in mid-August: The first stage saw prices reach my initial forecast target of $70/bbl in November They then fell further to reach my second price target of $50/bbl in January Since then, prices have been trading in a wide range. Daily moves of $2/bbl, […]

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Oil price rally a “Head Fake” says International Energy Agency

Why wouldn’t oil prices return to their long-term average around $30/bbl?  After all,  the world is facing a long-term energy supply glut.  The latest monthly report from the International Energy Agency (IEA) confirms my view that the recent rally has simply been a trading coup: “HEAD FAKE “Behind the façade of stability, the rebalancing triggered by the price […]

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Oil price, China Outlook – free pH Report webinar next Tuesday

There have so far been 3 stages to the oil price collapse since I first forecast this development in mid-August: The first stage saw prices reach my initial forecast target of $70/bbl in November They then fell further to reach my second price target of $50/bbl in January Since then, prices have been trading in a wide range. Daily moves of $2/bbl, […]

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Oil prices have further to fall as US inventory hits new records

Another week, and another record high for US oil inventories.  Oil prices clearly have some way to go, before they return to being based on the fundamentals of supply and demand. Thankfully, the looking-glass world of $100/bbl prices has finally begun to shatter over the past 9 months.  And we can expect prices to return to historical […]

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China exports deflation to the West

Unfortunately, the European Central Bank (ECB) does not read the blog, or yet subscribe to ‘The pH Report’.  If it did, it would have been forewarned back in August that a collapse in oil prices was potentially about to provide the catalyst for the arrival of deflation. Instead, as the Minutes of its critical January […]

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10 day Superbowl oil rally ends with storage tanks close to full

The 10-day wonder of the SuperBowl oil rally has ended.  Instead, we are returning to the world of the Great Unwinding, and prices are coming under pressure once more from the energy supply glut and weak demand. But it would be wrong not to mark the coup that took Brent prices up 26% from $50/bbl to $63/bbl […]

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Markets pause for breath as oil traders enjoy upstream volatility

There are some signs of a recovery in some markets, but the overall picture is still very quiet for what should be the seasonally strongest quarter of the year for the West.  Markets should also have been strong in Asia, in the run-up to this week’s Lunar New Year (LNY), but they have remained relatively […]

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Deflation gains: China’s plastics market sees over-capacity

More and more commentators are beginning to recognise that deflation is becoming inevitable in many major economies: China’s producer prices fell -4.3% last month, and its consumer prices rose just 0.8% Eurozone consumer prices fell in December to -0.2%, and are likely to have fallen further in January US prices rose just 0.8% in December and are […]

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Oil prices jump 20% in 2 days in SuperBowl weekend coup

An astonishing coup appears to have begun 10 days ago, in the last 45 minutes of trading in US oil markets.  Yet we still don’t know who master-minded it, or their full objectives.  . What happened to oil prices?  Prices jumped 8% in the last 45 minutes of trading on Friday 30 January, taking Brent to $53/bbl and […]

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How to survive the Great Unwinding of policymaker stimulus

I was privileged to be interviewed by Merryn Somerset Webb, editor-in-chief of MoneyWeek (the UK’s best-selling financial magazine) in this week’s edition.  The interview covered a wide range of topics including the perilous state of UK house prices and some stock markets, and has prompted enormous interest amongst MoneyWeek readers. Merryn is one of the UK’s leading […]

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Oil market faces “historic shift” – International Energy Agency

The above chart highlights one major reason behind my forecast last August that oil prices were about to collapse.  This was that US inventories were so high, storage was starting to run out: Inventory had reached all-time record levels, and was at around 60 days of sales (blue area) And so prices simply had to fall, to […]

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The great ‘Deflation Shock’ is coming closer

  The world is about to be hit by a demand shock equivalent to 1973′s supply shock.  Yet, astonishingly, most commentators remain so focused on central bank activity, that they have completely missed what is happening.  Here’s how it is playing out. You may remember the ‘The pH Report‘ forecast in early December that: “Oil prices […]

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You can’t print oil as fast as money

There has never been any fundamental reason for oil to trade at $100/bbl since 2011: There hasn’t been a single moment when a consumer failed to get the supplies they needed Inventories in the major markets such as the US have always been at very healthy levels And all the time, more and more production […]

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“Houston, we have a problem!”

Suddenly, far too late, the world is catching up with reality.  Goldman Sachs and others yesterday halved their forecast for Brent oil to $42/bbl from $80/bbl.  But this isn’t forecasting, this is simply catching up with events long after they happened.  Brent, after all, opened at $45/bbl this morning. As readers will remember, I forecast back in August […]

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Oil prices at $50/bbl, China slowdown – the New Normal arrives

Welcome to the New Normal. The Great Unwinding of policymaker stimulus has led global oil prices to drop back to $50/bbl.  Meanwhile China, the major source of demand growth since 2009, is now seeing a major slowdown. And, of course, this is still only the beginning of the great transformation that is now underway as we enter […]

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Oil price fall creates major inventory risk for chemical markets

Oil prices have now fallen $50/bbl since I forecast their collapse in August.  But it is only recently that companies and investors have begun to realise this price fall is real, and not just a minor blip.  As a result, few have yet recognised the extent of the collateral damage that is likely to appear in […]

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Why did nobody else forecast that the oil price would collapse?

Brent oil prices closed at $104.71/bbl on Friday 15 August.  On the following Monday morning, I published the first post in my Great Unwinding series, arguing that: “The Great Unwinding of the failed stimulus policies since 2008 has now begun…oil markets are starting to follow cotton and other commodities in refocusing on the fundamentals of supply and […]

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Oil price collapse, US$ rise confirm Great Unwinding underway

Stock markets are floating ever higher on an ocean of central bank money printing.  But something else is happening in the real world where we all live and work.  Since August, I have been warning that the Great Unwinding of this policymaker stimulus is now underway.  The chart above highlights how my 2 core forecasts have now been confirmed: Brent Oil […]

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Oil prices under pressure as US oil and gas output rises

Just 10 years ago, then BP CEO John Browne shocked the oil industry by suggesting that oil prices might “temporarily” rise to $40/bbl due to an imbalance of supply and demand, before falling back below $35/bbl again. Of course, prices in fact moved much higher, as policymaker stimulus in first the US and then the […]

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Great Unwinding leads to major chemical market downturn

It is now almost 3 months since I suggested the Great Unwinding was about to hit oil and chemical markets.  As the chart above shows, there has since been a major collapse in most of the markets in our benchmark portfolio.  Given their role as leading indicators for the global economy, this major downturn is extremely worrying: […]

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Oil price fall set to push Japan back into deflation

Could Japan actually go bankrupt at some point in the future?  This was the question left hanging in the air after Friday’s panic at the Bank of Japan, when its Governor forced through his new stimulus policy on a 5 – 4 vote. Financial markets’ first reaction was to assume this was a coup de théâtre on […]

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Oil price fall set to push Japan back into deflation

Could Japan actually go bankrupt at some point in the future?  This was the question left hanging in the air after Friday’s panic at the Bank of Japan, when its Governor forced through his new stimulus policy on a 5 – 4 vote. Financial markets’ first reaction was to assume this was a coup de théâtre on […]

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Oil prices have further to fall as Great Unwinding continues

Oil prices are highly likely to fall further, not rebound, over the next few months.  That is the blog’s conclusion to its 3-part analysis of likely developments in oil markets. Having looked at the outlook for oil supply and demand over the past 2 days, today’s post looks at the key question of ‘what does this mean for oil […]

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OPEC faces New Normal dilemma as oil demand slows

Yesterday’s post described how OPEC oil producers are seeing their export sales to the US start to disappear.  But this, of course, is only one side of the story.  As the chart from the Wall Street Journal shows, Saudi needs a $93/bbl oil price to balance its budget.  Most of OPEC needs a higher price.  Only Kuwait, UAE and Qatar need […]

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IMF says economic growth may never return to pre-crisis levels

The Great Unwinding of policymakers’ failed stimulus programmes is now clearly underway in the global economy.  The headlines this week all focused on the latest International Monetary Fund (IMF) report: “IMF says economic growth may never return to pre-crisis levels.” And then, in response, the US Federal Reserve suddenly realised that the US economy was not […]

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Oil prices break out of their triangle – downwards

The Great Unwinding of the central banks stimulus policies is underway, as discussed last week.  Oil markets have been one of the first to feel the change, as the chart shows, with prices finally falling out of the ‘triangle’ shape built up since 2008.  The value of the US$, interest rates and the S&P 500 […]

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An oil price fall would tip the world into deflation

The blog found it hard to believe, when it started to research for Boom, Gloom and the New Normal, how little information existed on basic facts such as population size and annual births.  Some countries such as the UK and Japan have data going back a century.  But they are the exceptions: US annual data […]

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Could the oil price triangle be close to cracking?

As discussed yesterday, energy markets are now going through major change.  Many of the investment banks who led the move to higher prices post-2008 are closing their commodity trading desks and withdrawing from the markets. Equally, the physical traders recognise that trying to push prices higher, without a real geopolitical threat, is like trying to push water uphill.  […]

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Oil consumption growth has slowed as prices have stayed high

As promised yesterday, the blog looks today at the impact of today’s high prices on oil consumption growth. As the chart, based on BP data shows, the ‘easy money’ policies of the central banks have only partially mitigated the impact of the oil price rally since 2009.  Consumption growth has not fallen to the 0.8%/year level […]

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Oil price costs remain close to 5% of global GDP

Oil markets have been driven by speculative excess since 2009.  None of the factors that were supposed to create supply shortages have ever occurred.  Markets have never even been close to scrambling for product.  And the rallies are getting shorter and shorter, as this simple fact is finally being better understood. Thus traders’ most recent efforts to create […]

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Oil will be left in the ground, as gas gains energy market share

The annual BP Energy Statistics publication is a treasure trove of information for anyone interested in global energy markets.  One key area is the impact of today’s higher oil prices on consumption growth, as highlighted in the chart: It starts from 1965, and shows consumption growth for oil (red line), gas (blue) and total energy (green) Oil’s […]

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Europe faces Russian gas and oil supply risk over Ukraine

History shows that that governments usually lose arguments with energy suppliers.  UK premier Harold Macmillan summed up the position when talking about coal miners in the 1950s, warning: “There are three bodies no sensible man directly challenges: the Roman Catholic Church, the Brigade of Guards and the National Union of Mineworkers” Unfortunately, Europe now potentially faces an argument with its leading gas […]

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Oil markets pressured by copper price falls

Whisper it quietly to your friends in the oil business.  But oil prices are looking very vulnerable.  Producers and the central banks have done a great job in creating the myth of imminent shortages – these have always been ‘just about to happen’ as a result of supply disruptions or the long-promised recovery in global […]

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The trend is your friend until it isn’t – part 2

“May you live in interesting times” is a Chinese proverb which has an alternative meaning as a curse.  And the blog suspects this duality of meaning may start to make a lot of sense as we go through 2014. We have, after all, been in a very strange world for the past 5 years.  Markets […]

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Can oil prices stay at $100/bbl forever?

Sometimes the blog’s mind goes back to its happy days in Houston, Texas, when it set up and ran ICI’s feedstock and petchems trading office.  And it thinks through the factors that it would have considered when deciding whether to buy, sell or sit on the sidelines. The memory came back during last week’s lively ACS webinar, when […]

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European oil travels the world as market complacency increases

The blog has a suggestion for a quiz question for anyone planning party games over the Christmas period: Q.  What was the longest distance travelled by a cargo of crude oil in 2013? A.  9000 km (5500 miles) from Scotland to China Isn’t that amazing?  We are constantly being told that supply is short, and that today’s high prices are […]

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Oil market hype fails to take prices out of their triangle

Pity for a moment those poor souls whose income depends on finding ever-more creative ways of justifying today’s record levels of oil prices.  One by one, all their favourite stories have disappeared.  Even the traditional summer warnings of record hurricane disruption have so far failed to deliver. How different it is from the start of the crisis, when the […]

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Pension fund speculation boosts oil prices as consumers suffer

Think back over the past 5 years.  Can you remember a single time when oil supplies were actually difficult to find?  If you can’t, then you have the same memory as the blog. Official statistics support this view.  Thus last week’s US EIA report noted that “U.S. crude oil inventories are near the upper limit […]

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Demand growth stalls as stimulus effects prove temporary

As executives return to their desks this week, they face some difficult judgement calls.  As the chart shows, markets have been worryingly quiet over the summer.  Most products in the IeC benchmark portfolio are unchanged.  Only Brent crude oil and naphtha have moved higher – due to Syria concerns – whilst benzene has moved lower.  But even these are relatively minor movements. This […]

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Japan’s liquidity programme sends oil, gold prices tumbling

Brent crude oil prices have now dropped $20/bbl since their February peak at $119/bbl. The major drop has occurred this month, following the Bank of Japan’s decision to introduce its own massive liquidity programme. This confirms the blog’s long-stan…

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Crude oil’s slide puts markets under pressure

Crude oil markets long ago lost their role of price discovery. Since early 2009, they have instead been dominated by pension funds seeking to find a ‘store of value’ as the US$ weakened, along with hedge funds enjoying a money-making ‘momentum play’. …

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"Its the oil price, stupid!"

Famously, when Bill Clinton ran his successful presidential campaign in 1992, his advisers would remind him of the key message with just one phrase “Its the economy, stupid!”. Today’s policymakers would do well to maintain a similar focus on the oil p…

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Lanxess temporarily closes plants, as demand remains slow

Chemical markets continue to paint a very worrying picture of the state of the global economy. There has been no improvement in demand over the past week, since the blog first raised the alarm. Instead, plants are being temporarily closed because of …

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Fed liquidity boosts oil prices as fundamentals weaken

Oil prices long ago moved away from the fundamentals, as the US Federal Reserve targeted asset price bubbles in a misguided effort to magic up consumption gains. Thus we have to focus on sentiment indicators, as in the chart above, to anticipate likel…

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Cracks appear in crude oil pricing

Crude oil and the major commodity markets have been a “fool’s paradise” in the past 4 years, created by the arrival of the central banks’ massive liquidity programmes. Pension funds rushed to buy, in the belief they would be a “store of value”. Hedge…

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Oil prices at record level for 2nd successive year

Crude oil prices remained at a record level for the second year running in 2012. As the chart shows, Brent prices averaged $112/bbl versus $111/bbl in 2011 (blue line). By comparison, 2008 averaged $97/bbl, or $102 if adjusted for inflation (red):

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Chemical industry operating rates fall as oil prices rise

The battle between the major central banks and the fundamentals of supply/demand is starting resemble the battlefields of the 1st World War. The generals running the campaign believe (with the exception of the Bank of Japan) that today’s crisis is sim…

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Oil price speculators drive major petchem volatility

It is tempting to think that oil price volatility is a zero-sum game. For every ‘winner’, one would expect there to be a ‘loser’. But when it comes to downstream industries like chemicals, the answer is more complicated, as Richard Bartlett, BP’s com…

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Israel’s backtrack removes support for oil prices

Since 2009, analysts have found it more and more difficult to explain oil price movements. They would like to believe these are driven by the fundamentals of supply and demand. But this is clearly not the case. Inventories all around the world are …

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Oil traders celebrate as Fed launches QE3

It was a very good week for traders in oil markets. Guaranteed profits are rare enough these days, even for them. But the combination of Mario Draghi at the European Central Bank, and then Ben Bernanke at the US Federal Reserve, meant they could put …

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Prices rise whilst demand falls

The blog is extremely concerned about recent market developments.

Nobody minds higher prices, if they are a response to strong demand and can be passed through to customers. But today’s high prices have nothing to do with strong demand. On the contr…

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Computers push oil prices higher, again

Trading volumes in financial markets are very low these days. Many ordinary investors are on holiday, and others are focused on the Olympics. So it is easy for the high-frequency computers to create major volatility – and large profits for their owne…

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Financial markets hope for more policy ‘lunacy’

The last few days have seen financial markets rallying, whilst the news from the real economy gets worse. US GDP growth in Q2 was just 1.5%. And the Wall Street Journal notes the recovery since 2009 has been the weakest in the post-War period.

But …

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‘Waiting for Bernanke’ is hottest show on Wall Street

‘Waiting for Godot’, the great play by Irish writer and Nobel Literature Prizewinner, Samuel Beckett, deals with the meaning of existence. Written just after the Second World War, its two characters wait endlessly for the arrival of Godot.

US financi…

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A is for Agility in today’s VUCA world

Pity the poor purchasing manager, who:

• Must keep inventories low as end-user demand remains slow, and the CFO remains very worried about the working capital risk
• Must keep inventories high, to minimise the risk of running short if supply probl…

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Weak chemical markets suggest difficult times ahead

Over Christmas, the blog spent some time considering whether its IeC Downturn Alert had served its purpose. By luck, or possibly judgement, it had been launched at the exact market peak on 29 April. And hopefully it had helped to alert companies to t…

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Morgan Stanley says commodity supercycle a myth

Morgan Stanley’s head of emerging markets seems to share the blog’s belief that the current oil and commodity ‘supercycle’ is simply a speculative frenzy.

Writing in the Financial Times, Ruchir Sharma notes:

“The daily news about falling oil prices…

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Another Minsky Moment may be approaching

The global economy is now in the middle of its 3rd downturn in the past 4 years. The chart above shows how the blog’s benchmark products have acted as leading indicators on each occasion (yellow highlight):

• In 2008, naphtha (red line) PTA (purple…

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Financial markets rally as real economy weakens

Petrochemical markets continue to provide plenty of warning signs about the deteriorating state of the global economy. As the above chart shows of price movements since January, even benzene is now weakening as supply disruptions fade.

The obvious …

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"A failure to stay ahead of events"

Petchem markets are doing an excellent job in their role as a leading indicator for the global economy. But as we warn in Boom, Gloom and the New Normal, policymakers remain in Denial about their message.

The chart above spells it out clearly.

Vol…

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Oil markets break out of their ‘triangle’

There has never been any fundamental basis for the rise in oil prices over the past 3 years:

• At no time has there been any actual shortage of product
• In fact, inventories have always been at comfortable levels

They rose only for two reasons:
…

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What goes up, comes down

Don’t panic is the blog’s suggestion, after last week’s market collapse.

Instead, the important thing is to plan for what might happen next. Scenario planning is absolutely critical to survival over coming months.

The blog’s advice is to assemble yo…

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Market volatility hits new peaks

Petchem markets provided a perfect case study of Volatility last week, confirming the blog’s view that we are heading into a VUCA world where Volatility, Uncertainty, Complexity and Ambiguity will dominate.

This was also real volatility, where prices …

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Complacency rises as markets fall

Financial markets are telling us something important about the outlook.

Profitable themes over the past month have been expectations of weakness in crude oil prices, in China’s economy, and in the financial sector; plus positive views on long-dated go…

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Buyers disappear as oil prices fall

Petchem markets continue to fulfill their role as leading indicators for the global economy. The chart shows the benchmark products in the IeC Downturn Monitor since January 2011:

• PTA prices in Asia (red line) have remained weak throughout, clear…

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Saudi warns, again, that oil prices are "too high"

Brent oil prices are still within the triangle formed by movements over the past 4 years. As the chart shows, they tried to break-out on the upside last month, based on Iran supply worries. But since then, they have retreated again.

Interestingly, t…

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Cash-flow fears rise as the ‘storm’ gets nearer

The blog fears the storm discussed last month is getting closer.

Oil prices have weakened, with Brent falling $7/bbl last week to $113/bbl as Iran worries reduced. Attention is thus refocusing on the fundamentals, where US oil inventories are now at …

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Downturn Monitor approaches its anniversary

It is almost a year since the blog launched its IeC Downturn Monitor. The aim was to try and avoid the problems seen in H2 2008, when operating rates remained high down the value chain whilst demand fell.

The above chart shows the weekly changes in…

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Financial markets rally on false rumour

Last week saw yet another example of the damage being caused to financial markets by the computerised high-frequency traders (HFTs).

As the chart shows, the S&P 500 jumped 20 points on Thursday (1.5%), whilst the Dow Jones Industrial average jumped ov…

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Markets weaken as real problems remain unsolved

It is hard to be very optimistic about the demand outlook for Q2.

Demand in Q1 was lacklustre, even though it should have been the strongest quarter of the year. H1 is seasonally strong, and Q1 also benefited from Easter being in Q2. Equally, the Ch…

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Oil prices near Q2 2008’s record level

Finally, and far too late, policy makers are waking up to the damage that today’s high oil prices are doing to the global economy. Q1’s oil price averaged $119/bbl, just 7% below Q2 2008’s record $127/bbl ($2012).

Thus Saudi Oil Minister, Ali Naim…

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Petchems ‘sailing towards a storm’

Q1 should have been a strong quarter for global petchem demand:

• Buyers had to restock in the New Year, as CFOs had cut working capital for year-end reasons
• In the West, Easter is delayed until April, and the USA has benefited from the warmest …

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Financial and petchem markets differ on the outlook

“Two roads diverged in a yellow wood,
And sorry I could not travel both”
The opening of Robert Frost’s famous poem ‘The road not taken’ aptly sums up today’s market situation:

• Financial markets continue to be supported by the Fed’s Operation Twi…

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Benzene, PTA warn new downturn may be close

As regular readers know, the blog regards benzene as an excellent leading indicator for petchem markets and the global economy. Its track record since the start of the crisis in 2008 has continued to be strong.

The reason is probably two-fold:

• I…

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Markets wait for oil price lead

The March IeC Boom/Gloom Index confirms the blog’s sense that markets are sitting on a fence, waiting for something to happen. As the chart shows (blue column), it has risen back to 4.1, just at the point which divides strong from weak markets.

Simil…

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Demand declines as Federal Reserve fuels oil price rise

The Wall Street Journal carried an interesting opinion piece on Friday, assessing current market conditions from the viewpoint of the film character, Forrest Gump. Gump’s key insight is that “Stupid is as stupid does”. Thus the Journal noted:

“Oil …

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IEA forecasts show high oil prices destroy demand

Over the past 18 months, the main investment analysts have argued that high oil prices would have no impact on the global economy. Now, new forecasts suggest their optimism has been misplaced.

The chart above gives the International Energy Agency’s…

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Financial markets jump, but petchems remain slow

Dow Chemical is usually optimistic. 6 months ago, for example, it reported that “our transformed portfolio, underpinned by our cost-advantaged and flexible operations, is now performing at a new level.”

Last week, however, Dow reported that Q4 operat…

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Uncertainty grips New Year trading

Markets are worryingly quiet for the start of a New Year. There is some restocking underway, but the main interest lies in the crude oil market.

Since Brent peaked in April, there has been a clear pattern each month:

• Prices have peaked at the …

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Record high oil prices hit demand

The blog is quite surprised at the mainstream media’s lack of interest in the fact that average Brent oil prices were at record levels in 2011 in real terms (adjusted for inflation).

The annual average of Brent prices recorded by the US Energy Infor…

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2011 saw ‘long-drawn out fundamental downturn’ begin

The chart above shows how the benchmark products in the IeC Downturn Monitor moved during 2011. The yellow shaded area covers performance since 29 April, when the Monitor launched.

It shows a year of two halves:

• The period to the end of April wa…

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Oil prices hit record annual level in 2011

High oil prices are a bad thing for the global economy, and for the chemical industry,

2011 was therefore a very bad year indeed.

Brent oil prices, the global benchmark, averaged $111/bbl in 2011. This is higher even than in 1979 and 1980, after adj…

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The oil market’s ‘triangle’ pattern continues

The other side of the short-term volatility in oil markets, as discussed yesterday, is that price movements are still trapped in their long-term triangle pattern.

As the chart shows, Tuesday’s $3/bbl move was not part of a break-out to new high ground…

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ExxonMobil expect gas use to rise 60% by 2040

ExxonMobil’s annual energy review is always a fascinating read. This year’s issue looks out to 2040 for the first time. It thus forecasts the relative share of the major fuels over the next 30 years.

Interestingly, it also shares the blog’s belief, …

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IMF warns of protectionism, and possible Depression

Whisper it softly, so as not to alarm the CEO. But the world is starting to look worryingly like the picture of mid-2008.

Official bodies such as the IMF are always cautious in forecasting a downturn. They rightly worry that they could help to cause…

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DuPont warns and stresses "productivity initiatives"

By now, companies should be reordering for the New Year. CFOs have achieved their working capital targets for year-end. And the commercial people should be planning Q1 sales.

So far, however, it seems that this restocking has proved rather weak. …

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Petchem trading slows as holiday period nears

The blog was in Singapore last week, running the final New Normal workshop of the year with co-author John Richardson. The main topic during the breaks was the continuing concern over China’s demand.

This is reflected in the latest Downturn Monitor a…

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Markets slip in China and Europe

Many investors and policymakers believe that the global economy is just in a ‘soft patch’. They expect a quick recovery early in 2012. This parallels their misguided confidence in Q1 that a strong recovery was underway.

But petchem markets, a much m…

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Policy makers talk, whilst markets weaken

Petchem markets are telling us something very important about the state of the global economy. They are doing their usual job as leading indicators. Prices for all 4 of the blog’s benchmark products are now down over 20% since it launched the IeC Dow…

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Brent oil prices stay in their "triangle"

English children have a nursery rhyme that seems to summarise price movements in Brent oil markets:

“Oh, The grand old Duke of York,
He had ten thousand men;
He marched them up to the top of the hill,
And he marched them down again.

And when they wer…

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UK government prepares for "economic Armageddon"

The UK government has now confirmed that it is preparing contingency plans for “economic Armageddon”, if the eurozone falls apart. This highlights the difficulties currently facing the world economy.

Meanwhile the Eurozone leadership has clearly …

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The Downturn arrives

It is 5 months since the blog launched its IeC Downturn Alert, using prices from 29 April. It wrote then that:

“They don’t ring bells at market turning points. Otherwise, we could all retire to the Bahamas.”

But its argument was that a peak was li…

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EU’s plan to borrow from the poor boosts S&P 500

The brave new world of modern finance continues to amaze the blog.

It still has problems with the idea that the answer to having too much debt is to borrow some more. But last week’s Eurozone summit not only did this (as noted by the German central b…

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US financial markets defy gravity

Blog readers can choose their favourite leading indicator this week.

In financial markets, the US S&P 500 index continued its recent rally. If you believe the bullish analysts; a Greek default, lengthy arguments between Germany and France, and the ne…

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Global oil bill now 5% of GDP

The world has suffered a recession every time the oil price has reached current levels. And as the blog has warned for months, this time is unlikely to be different.

The reason is captured in the above chart. This uses:

• Oil production since 19…

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Downturn continues as financial markets sink

ICIS pricing is a very valuable resource, particularly at market turning points. It highlighted the start of the current downturn in April, when reporting that buyers had moved to operating on a ‘hand to mouth’ basis.

Now, its market editors are high…