Helping you navigate the new normal
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
The post Oil markets enter the endgame as car companies rush to electrify appeared first on Chemicals and the Economy.
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
The post “When all the experts and forecasts agree — something else is going to happen”, Bob Farrell appeared first on Chemicals and the Economy.
2 major events shocked oil markets last week. They marked the start of (a) the endgame for the Age of Oil and (b) the paradigm shift to the Circular Economy and the new Age of Energy Abundance. The new ‘Net Zero by 2050’ report from the International Energy Agency (IEA) was the first shock: It
The post Oil markets, OPEC, enter the endgame for the Age of Oil appeared first on Chemicals and the Economy.
Plastics has long been the ‘odd one out’ in terms of recycling. Steel, aluminium, glass, cardboard, rubber and paper routinely have up to a 70% rate of recycling. But plastics has been stuck at around 10% for a long time. President Biden’s Earth Day Summit is likely to change this picture, and quickly. The reason
The post Biden’s Earth Day Summit puts plastics recycling on the fast track appeared first on Chemicals and the Economy.
Everyone who has ever played the Beer Distribution Game on a training course knows what is happening in supply chains today. A small increase in underlying demand is rapidly leading to a massive increase in ‘apparent demand’. As the New York Times reports, “the pandemic has disrupted every stage of the (supply chain) journey.” And
The post Rising US interest rates, US$ and oil prices set to pressure financial markets appeared first on Chemicals and the Economy.
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
The post Weak demand – and the illusion of a return to “normal” appeared first on Chemicals and the Economy.
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
The post Iran highlights OPEC’s dilemma on output cuts appeared first on Chemicals and the Economy.
“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’,
I worked for many years at a world-leading chemical company, ICI. But sadly, it lost its way as senior management began to focus more on financial metrics than market developments. In 2007, it disappeared. Today, other companies including the once-mighty ExxonMobil risk making similar mistakes: EM was the world’s most valuable company just 9 years ago It
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
10 years ago, I took a look ahead at what we could expect in the next decade, as discussed last week. Unfortunately, we now face the major economic and social crises that the chart predicted, if policymakers continued with ‘business as usual’. This week, I want to look ahead at what we can expect to
Next week, I will publish my annual Budget Outlook, covering the 2021-2023 period. It will highlight how the pandemic is accelerating major paradigm shifts in society, politics and the global economy. I have been publishing these Outlooks since 2007, and they disprove the idea that forecasting is a waste of time. They highlight instead most
The chemical industry is the best leading indicator for the global economy. On Friday, I had the privilege of discussing a wide range of key issues with Ajaya Sharma in a lunchtime interview for India’s main business station, ET Now. Our interview focused on a number of critical areas and why the future is going
The wisdom of Sir Robert Walpole, the UK’s first premier, seems the only possible response to this weekend’s headline from the Wall Street Journal. How can a National Emergency ever be the basis for a major rise in stock markets? Of course, we all know that stock markets have become addicted to stimulus. But the
Four serious challenges are on the horizon for the global petrochemical industry as I describe in my latest analysis for ICIS Chemical Business and in a podcast interview with Will Beacham of ICIS. The first is the growing risk of recession, with key markets such as autos, electronics and housing all showing signs of major
There were only two winners from the past 3 months of OPEC’s “Will they?, Won’t they?” debate on output cutbacks. Iran wasn’t one of them – although the talks did emphasise its renewed ability to control the OPEC agenda. Nor was Saudi Arabia, forced to accept the lion’s share of the proposed cutbacks. Instead, the […]
New data from the International Monetary Fund confirms that last year’s collapse in global GDP was even worse than first reported. As the chart shows,the fall when measured in current dollars was a record $4.7tn, versus $3.3tn in 2009. And it was 6% in percentage terms versus 5.3% in 2009: Even more worrying is that […]
Global markets are becoming ever more complex as the Great Unwinding of stimulus policies continues. This means that each blog post is now taking much longer to write. It therefore seems sensible to focus on writing 3 posts each week – on Monday, Wednesday and Friday – in order to continue to provide the highest possible […]
I spent most of last week in New York and Boston, meeting with major investors. One key topic on all their agendas was the major downturn underway in the global mining industry. The connection with my visit was that some have already begun to worry that the planned US ethylene expansions may lead to a […]
The oil market was the first to feel the impact of the Great Unwinding of policymaker stimulus nearly a year ago. It had completely lost its key role of price discovery due to the liquidity being supplied by the central banks. This had overwhelmed the fundamentals of supply/demand. And we are still living with the consequences […]
The first half of 2015 was the worst half-year for force majeures in the chemical industry since reliable data became available via ICIS news in 2005. As the chart shows, there were 479 reports of outages, more than double H1 2014 and well above the previous peak of 375 in H1 2011. This is absolutely […]
Oil prices have fallen around $5/bbl, since my suggestion last week that a “New oil price fall was a matter of “when”, not “if”“. It thus seems increasingly likely they are resuming their fall back towards $30/bbl, as we discussed in last week’s pH Report webinar. Financial players clearly misread the market when they assumed […]
Financial players have become convinced in recent months that the oil price will rise. And so far, this has been a self-fulfilling prophecy. Their buying has led to oil being stored all over the world – in tankers floating at sea and in shale oil wells, as well as in storage tanks. Unsurprisingly, prices have […]
China was the “saviour “of the global economy after the financial Crisis of 2008. Its massive stimulus was worth over $10tn from 2009 to 2014 – half of the total amount. But now China’s new leadership has changed course, and has introduced its New Normal policies. As a result, its economy is slowing, and its […]
Whisper it quietly to your friends in the futures markets, who are convinced oil prices will soon surge higher. We don’t want to upset them as they work at their spreadsheets, and send their electronic trades down specially constructed lines at near the speed of light. But global oil demand growth has already more than […]
Volatility creates uncertainty. And uncertainty can easily lead to paralysis, if a company hasn’t planned ahead for the range of potential scenarios that might develop. This is the risk highlighted in my usual analysis of quarterly results. A key warning sign is the divide that has developed recently in performance in different regions and industry sectors, […]
Data over the past month continues to confirm my fears that the US housing recovery is going into reverse. The argument was summed up yesterday by S&P’s chairman, when reporting Case/Shiller housing price data for December: “The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home […]
The world’s major shipping index, the Baltic Dry (BDI), has collapsed by 2/3rds since November, and by 80% since its earlier December 2013 peak, as the chart shows. It is now at an all-time low of 509, almost half of its initial 1000 level when established in January 1985. Shipping is the major mode of transport for world trade, […]
The best view is always from the top of the mountain. That’s probably why the outlook seems so promising for US auto and housing markets. Both appear to be doing well on the surface, but dig a little deeper and concerns soon emerge. The chart above demonstrates the point, updating the data from my July post […]
The best view is always from the top of the mountain. And that seems where we are today in global auto markets. They are on track for another record year. And even better news is that sales have risen in each of the 5 major markets for the first time since 2007. The bad news is that […]
Nobody knows how the Great Unwinding of central bank stimulus policies will develop. The world has simply never been in this position before. Thus the senior economics and business correspondent of the Financial Times, John Plender, began an article this week: “In a market where asset prices are comprehensively rigged by central bankers, rational investment […]
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 […]
There is an alarming naivety about Western policymakers’ response to events in the Ukraine. They have simply chosen not to recognise that Russia’s strategic objectives are no longer about building links with Europe, but are instead about creating a Eurasian Economic Union (EEU). Thus they assume that Russia will always put its economic interests ahead of its political objectives. And […]
Slowly but surely the myths over supposed supply shortages in the crude oil market are being exposed. As leading US investment magazine Barron’s wrote this week: “In May, U.S. production hit its highest monthly average level since 1988 and is projected to keep rising. Domestic supplies have piled up in storage, especially on the Gulf […]
Imagine that 5 years ago, you had been asked by your Board to forecast future oil prices. And suppose you had prepared a forecast which said: Oil demand growth will slow in the West, as cars become more fuel-efficient and ageing populations drive less Demand growth in the emerging economies will be supported temporarily by real estate […]
Companies are about to review their Q1 performance, and re-forecast profit and revenue for the rest of the year. Most will be disappointed with results so far, as the long-promised economic recovery has again failed to appear. This will be no surprise to blog readers. But there is another and connected issue for Management Teams to worry […]
When was the last time you told your customers that they would have to wait 570 days for delivery of material for which they have already paid? You’ve never done this? Well, you need to take lessons from those super-smart people who own the aluminium warehouses, such as Goldman Sachs (pictured above by Reuters). As the blog […]
There seems almost no need to publish a forecast for 2014. Policymakers have toured the TV studios to confirm that this is finally the year of recovery. They admit it may have taken nearly 5 years longer than first expected, and that there have been numerous ‘false dawns’ on the way. But now, they are certain that […]
Will the US be able to sell all its planned new petchem volumes? That is the 3rd topic in the blog’s series about critical areas where we all think we know what’s happening, but may end up being surprised. We all know that the US now has a major feedstock advantage versus Europe, Asia and Latin America due […]
The Financial Times has carried an excellent analysis this week of the key shale gas issues facing the European chemical industry. It includes comments from a number of CEOs, as well as from the blog. Its key points are as follows: THE STRATEGIC DILEMMA “European petrochemical makers risk being squeezed between low-cost producers in the Middle East […]
2013 has seen 3 types of markets develop for the blog’s IeC Downturn Monitor portfolio as the chart above shows: Financial assets such as the S&P 500 (purple) have soared, as did the US$ against the yen (orange) Crude oil (blue) and naphtha (black) tried to follow, but found it difficult to pass though the higher prices Benzene (green) and […]
Iran has been at the centre of all the major oil market price spikes in the past few decades: Today’s record prices on an annual basis are partly due to market fears over supply disruptions due to the Iran/Israel nuclear issue Fears over a nuclear showdown also led prices to jump to $150/bbl in July 2008, when the […]
Benzene has always been one of the blog’s favourite leading indicators for the global economy. The reason is simple, in that it has been around a long time, and is now used in a very wide range of industries. So it provides us with a broad-based picture of the global economy. The chart above highlights another important […]
The blog was very pleased to see the Nobel Prize awarded jointly to Robert Shiller, whose words of wisdom on housing and stock markets it has cited many times. Shiller’s key insight, in his book Irrational Expectations and since, has been to confirm Ben Graham’s famous saying: “In the short term, the market is a […]
The blog still owns the lapel button it was given when running ICI’s feedstock and petchem trading office in Houston, Texas. Its advice for any trader is excellent – ‘The Trend is Your Friend’. But as all traders learn over time, there are moments wh…
‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
This quotation from Lewis Carroll’s great novel ‘Through the Looking-Glass’ rather seems to sum up policymakers’ cur…
As the blog discussed yesterday, central banks have now kept oil prices above the historical $10-30/bbl range for 10 years.
But can they remain there forever?
What might bring them back in line with the fundamentals of supply/demand? And what would…
Since 1900, as the chart shows, oil prices have never been so high for so long as now. Until 2003, they had only been above $30/bbl for 4 years between 1979-1982, during the OPEC production cuts in the Iran crisis. But since 2004, they have been cont…
Have you ever wondered, as you pay your energy bill or fill the fuel tank in your vehicle, just why oil prices have risen so much on the past decade? The question occurred to the blog when reading a Reuters report of the latest Outlook from the Intern…
Oil prices are heading for a second successive year of record annual prices. Last year, Brent averaged $111/bbl and it is averaging similar levels so far in 2012. History suggests this is very bad news for consumers, for companies and for the global …
The US spent $6bn on its presidential and congressional elections this year. Apart from expressing the will of the people, it may also prove valuable if it helps to highlight the danger of allowing wishful thinking to override factual evidence on the …
The blog is awarding itself and fellow-blogger John Richardson a pat on the back this morning. The reason is that investment bank Goldman Sachs, the largest player in commodity markets, has completely reversed its analysis of oil markets. They now ac…
The US Federal Reserve and the European Central Bank have adopted new and aggressive monetary measures to try and boost US employment and stabilise peripheral Eurozone bond markets. Unfortunately, their actions are more likely to increase the chances …
Markets spent last week ‘waiting for the Fed’. The high-frequency traders desperately need more cheap money, if they are to continue driving commodity and stock prices higher. And on Friday afternoon, they believed they got their wish.
Brent crude o…
Nobody rings a bell at market tops or bottoms. Instead, one has to look for the divergences that suggest the previous trend has run its course. Today, these abound:
• Western financial market volumes are low, whilst prices are rising
• The same …
Oil markets have weakened significantly since they fell out of their major ‘triangle’ formation earlier this month. WTI is already within the forecast $60-80/bbl range although, as the chart shows, Brent still maintains a $10/bbl premium at $90/bbl.
…
Brent oil prices have just finished a record sequence of 240 days above $100/bbl. This was longer than the 170 days in 2008. And longer, on an inflation-adjusted basis, than in any previous period of high oil prices.
In Europe, prices were actuall…
Parabolic price movements are great fun whilst they last. The dot.com technology stock boom was a great example, when prices would jump 1% or 2% a day towards its end. And then, sadly, it all collapsed.
The NASDAQ technology index doubled in a yea…
A blog reader has kindly forwarded an important UNCTAD paper (UN Conference on Trade and Development), analysing the growth and impact of high-frequency trading (HFT) on oil and financial markets.
It provides important “new evidence regarding the fi…
New research by the Centre for Global Energy Studies (CGES) suggests that “The price of oil has to come down because supply prospects are so positive. The rate of demand isn’t going to grow as in the past as we use resources more efficiently.”
The cha…
Oil prices are poised at a critical point. As the chart shows, the recent rally has taken them to the top of the triangle formation that has built up over the past decade. Players now need to decide if they are confident enough to push prices into hi…
The US S&P 500 is the most important stock index in the world. It contains 500 different major companies, in a wide variety of industries, and has been calculated since 1957.
There has never been a day when all 500 stocks moved in the same direction….
An excellent new report from Citi’s commodities team suggests the US supply/demand balance for crude oil is undergoing fundamental change.
Importantly, they also argue that the concept of ‘peak oil is being buried’, and add:
“The belief that global…
January was not a great month for auto sales in the 3 major markets of the USA, EU and China. These amount to over 50% of global auto sales, and are a key indicator of underlying consumer demand.
As the chart shows, sales were just 3m (red square), d…
This time last year, the petchem industry stood on the edge of an unseen precipice. Life seemed good. Prices were racing ahead and demand appeared buoyant. But in reality the buyers were only buying forward to protect margins, whilst end-user demand…
Last April, China’s polyester market provided an early warning signal that the current downturn was about to start. Now, it is flagging an important change in relative positions within the value chain.
9 months ago, the divergence between crude oil …
Shipping markets are usually a good leading indicator of future economic activity.
They have their own supply/demand balances, of course. Not every uptrend or downtrend can be taken too seriously.
But the Baltic Dry Index of ocean freight costs …
‘Would you buy, or would you sell?’ is always an interesting question in any market. Petchems provide a particularly balanced answer today.
• Buy arguments include – China’s buyers will return from holiday, and will need to restock; gasoline mark…
Latest data from the IMF shows that the EU remains the world’s largest economic unit. Its GDP in 2010 was $16.2tn, 26% of the global economy. The USA was next with $14.5tn, and China 3rd with GDP of $5.9tn.
So what happens in Europe matters greatly…
The blog’s argument that there is no shortage of crude oil seems finally to be going mainstream.
Equally, its concern over the impact of today’s high prices, especially by comparison with natural gas, is also now starting to be highlighted.
Thus th…
Cars are now the largest single market for chemical sales, as housing markets have slowed globally. Each new US car is worth $3297, for example, according to the American Chemistry Council (ACC), making the US market worth $42bn in 2011.
2011 auto …
There is no arguing with markets when they are being driven by sentiment, either positive or negative. Last week’s news of China’s slower GDP growth gave rise to opposite interpretations in Asia and the West – but news media reported both were seen as…
The International Energy Agency (IEA) confirmed the blog’s worst fears this week, with its announcement that crude oil demand actually fell by 300kbd in Q4. Not only is this “quite rare” as the IEA noted, but they went on to warn:
“We’re flagging tha…
The blog suspects that the above chart may not feature prominently in the New Year reports about to be published by the main oil market brokers.
These will instead probably highlight the view that oil markets are very tight, and that prices should sur…
A year ago, Petromatrix highlighted the short-term ‘triangle’ that was being drawn by oil prices. This describes a period when sellers and buyers are evenly balanced, and neither side can gain momentum to take prices in their favoured direction.
It u…
The blog will publish its fifth annual Budget Outlook next weekend. As usual, it is therefore time to review last year’s Outlook. Past performance may not be a perfect guide to future outcomes. But it is one of the best that we have.
The blog’s 2008 O…
There seems little doubt that the global economy is now entering a new downturn. Pessimists may worry that it has already begun in Q3. Optimists might hope it will be delayed till Q4, or even Q1.
But almost all major indicators are pointing in the …
Europe is at the eye of the storm when it comes to energy pricing. This is the last thing required by its struggling economy.
As the chart shows, Brent in euros (green line, RHS) is now back at the same level as June 2008, whereas WTI is 35% cheaper …
Chemical markets are traditionally 6 months ahead of the wider economy, as they are so focused on consumer demand. September may therefore provide a ‘moment of truth’ for the IeC Downturn Alert, launched in April:
• The petchems downturn since Ap…
The above chart, from the invaluable American Chemistry Council (ACC) weekly report, highlights the scale of Q1’s inventory build in N American polymer markets (polyethylene, polypropylene, PVC).
This build took place as consumers down the value chain…
Today’s 419 point fall on the Dow Jones Average, and $6/bbl fall in WTI crude oil prices, may not be just another example of the wild volatility that has come to seem normal in financial markets.
It may also mark the end of an era.
Since 1994, the …
The blog’s IeC Downturn Alert is now 3 months old. The aim was to provide enough time for readers to develop robust contingency plans, as a new global downturn became more and more likely.
A key issue is that dysfunctional political systems in the eu…