Helping you navigate the new normal since 2001
Policymakers lost touch with the real world as their stimulus programmes – $353tn, 305% of global GDP – drove global debt to record levels after 2008. But now, the energy crisis is forcing them to face up to a very painful reality. Consumers, companies and investors are paying the price for their folly.
US 10-year interest rate nears 5% as rising energy costs fuel inflation Read More
We are nearing crunch time for vital energy supplies of transport fuels and natural gas. Europe’s gas storage for the winter was just 28% full when refilling for the winter began in April. And around the world, energy supplies are getting tighter by the day.
Hormuz fighting, Russia’s fuel crisis, highlight risks to global fuel and gas supplies Read More
There are major upside risks on crude oil and product pricing as we head into H2. Inventories are very low, with no margin for error. And nobody knows whether the current US-Iran talks will actually end in a long-term agreement.
Major upside risks remain for oil and product pricing in H2 Read More
Oil companies are warning that “the US Strategic Petroleum Reserve is going to be precariously low. What comes next is higher prices. We are getting closer to the bottom. July is likely the pain point when the market turns.”
Hormuz closure pressures global oil reserves and food supplies Read More
Financial markets are assuming the Strait will reopen this month, and free passage resume in June. If this is delayed, the risks of a global downturn to rival 2008 are rising.
Hopes rise for an early return to free passage in the Strait of Hormuz Read More
Petrochemical prices are warning of major inflation risks ahead due to the crisis in the Strait. They confirm we need to move back to a world of ‘local-for-local’ supply chains. The question is how quickly these can be put in place?
Petchem price rises confirm inflation risk as Strait of Hormuz remains closed Read More
As with Covid in March 2020, a ‘wake-up call’ is now about to hit most Western governments. Critical oil and gas-based products are at increasing risk of becoming unaffordable, or unobtainable.
Oil and product prices set to be ‘higher for longer’ as Hormuz remains closed Read More
We are likely entering a very difficult few months. As the IEA warns, major changes in our lifestyles will be needed unless the war ends soon and the Strait of Hormuz reopens.
The biggest energy supply shock in history has reached the one-month mark Read More
As the BBC warns: “The greatest danger now is that President Trump, having amassed this powerful force close to Iran’s borders, decides he must act or lose face, and a war begins with no clear end-state and with unpredictable and potentially damaging repercussions.”
It is hard to accept the IEA’s belief that petchems can drive future oil market growth. Demographics mean that global petchem demand is probably already close to peaking. And ethane is an increasingly competitive alternative to high-priced oil and naphtha
Wishful thinking prompts IEA’s belief that petchems can drive oil demand growth Read More
Oil prices seem likely to continue under pressure. Inventories are at near-record levels. President Trump’s Trade War is slowing the global/US economy. And his Gaza peace deal creates the potential of a new Iran nuclear deal. Houthi attacks in the Red Sea may also reduce
Today’s oil market appears calm – but risks are rising under the surface Read More
Oil market volatility is likely to continue. But OPEC’s need to regain market share also makes it likely that prices will continue to decline. This is good news for the global economy – and geopolitically as it means Russia will have less money to spend on its Ukraine war.
Oil price volatility highlights underlying market weakness Read More
President Trump’s ‘drill, baby, drill’ policy is hoping to turn back the clock on the Energy Transition. Oil market volatility is therefore inevitable, and will add to the volatility he has created in the economy and financial markets.
Oil prices fall out of their ‘triangle’ as Trump’s trade war risks global recession Read More
Oil markets are warning of rising economic and political risk. Prudent companies and investors will be preparing for difficult times ahead, whilst still hoping for the best.
Brent falls out of its triangle – for the third time Read More
Oil market developments need very careful attention. If prices do now fall below $50/bbl, then central banks will likely rush to make major cuts in interest rates. And that will make deflation even more likely.
Deflation risks rise as OPEC aims to regain market share and cut oil prices Read More
Oil traders have built a record bearish position in oil futures, as they expect consumption growth to stay weak. So it would be no surprise at all to see prices fall towards the $50/bbl level.
OPEC+ countries have been playing the geopolitical card for the past 2 years. But their output cuts have allowed US producers to gain market share, with production up 1.2mbd. The hurricane season may support prices for a while. But the risks are all to the downside. And, of course, today’s higher prices are also helping to accelerate the energy transition.
The Houthi attacks and increased hurricane risks highlight how geopolitics are replacing economics as the key driver for decisions. Global supply chains are increasingly being replaced by local-for-local operations as producers aim to improve reliability and control costs.
Hurricanes, Houthis, pressure global supply chains and add to inflation risk Read More
OPEC would have been better advised to keep prices low to reduce non-OPEC supply and support demand. Instead, they are likely to face some difficult pricing decisions later in the year, if global growth continues to slow.
OPEC starts to refocus on market share as demand growth weakens Read More
The oil price has rallied 22% over the past 4 months, since it bottomed at $74/bbl. And slowly but surely, traders are being forced to realise that geopolitics are replacing economics as the key driver for world markets.
Oil and financial markets start to wake up to geopolitical reality Read More
The mobility market is repeating the transformation seen a century ago, when cars replaced stagecoaches. Autos are the world’s largest manufacturing industry, employing millions of people directly and in supply chains.
Those companies that learn to ride the wave will likely be very successful for years to come.
The energy transition powers ahead, as Electric Vehicle sales continue to ramp up Read More
It’s too soon to talk of an actual energy crisis. But as the charts showing Brent oil and European natural gas prices confirm, it is certainly time to start planning for the possibility. Oil prices have recently risen 25%. And Europe risks gas shortages if there is a cold winter
Energy markets could be heading towards a new crisis Read More
The good news for consumers is that the move to renewables is already set to save European consumers €100bn in 2021-23. The technologies needed in terms of wind, water, solar and storage can successfully deliver the cheaper and more reliable energy supply needed to support the global economy.
OPEC struggles with lower demand as the war accelerates the move to renewables Read More
Portugal is showing the way. Despite 6 months of drought last year, 57% of its electricity came from renewables. And its clean energy focus means it is becoming “one of the cheapest markets in Europe”. CO2 emissions will also have reduced by 75% in 2030 versus 2021.
Consumer sentiment is already at all-time lows. Rising energy, transport and food prices will likely soon push inflation above 10%, and interest/mortgage rates to 5%+, adding to the risk of a major and long-lasting downturn.
We can expect to see electricity prices fall along with CO2 emissions. And consumers will no longer be held to ransom by geopolitical events
COP26 confirmed that the world is moving away from fossil fuels. OPEC’s high prices have made this move easier to afford by causing artificial shortages.
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.
Oil markets enter the endgame as car companies rush to electrify Read More
My Dutch colleague, Daniël de Blocq van Scheltinga, is a graduate of Leiden University in the Netherlands, with a Master of Law degree and a specialty in International law. Here he gives his expert view on the Dutch court’s decision to order Shell to reduce its CO2 emissions by at least 45% , relative to
The post Friends of the Earth v Royal Dutch Shell – what did the Dutch Court rule, and what does it mean for Shell’s business? 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.
Oil markets, OPEC, enter the endgame for the Age of Oil Read More
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.
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
Contingency planning has become mission-critical. The longer the coronavirus pandemic continues, the more it will expose the underlying fragility of today’s debt-laden global economy. Companies therefore have to move into crisis management mode, with a number of key areas requiring immediate attention: • Employee health and safety is the top priority. Governments are slowly waking
Former Saudi Oil Minister Sheikh Yamani’s warning in 2000 looks increasingly prophetic today: “30 years from now, there will be a huge amount of oil – and no buyers. 30 years from now, there is no problem with oil. The Stone Age did not end because the world ran out of stones, and the Oil
Oil markets hit perfect storm as coronavirus cuts demand Read More
Oil markets can’t quite make up their mind as to what they want to do, as the chart confirms. The are trapped in a major ‘flag shape’. Every time they want to move sharply lower, the bulls jump in to buy on hopes of a major US-China trade deal and a strong economy. But when
Oil markets hold their ‘flag shape’ for the moment, as recession risks mount Read More
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
Oil market weakness suggests recession now more likely than Middle East war Read More
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
Recession risk rises as Iran tensions and US-China trade war build Read More
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
Déjà vu all over again for oil markets as recession risks rise Read More
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 […]
The post Oil prices flag recession risk as Iranian geopolitical tensions rise appeared first on Chemicals & The Economy.
Oil prices flag recession risk as Iranian geopolitical tensions rise Read More
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 […]
The post Saudi oil policy risks creating perfect storm for Aramco flotation appeared first on Chemicals & The Economy.
Saudi oil policy risks creating perfect storm for Aramco flotation Read More
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 […]
The post Economy faces slowdown as oil/commodity prices slide appeared first on Chemicals & The Economy.
Economy faces slowdown as oil/commodity prices slide Read More
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 […]
The post Saudi Arabia’s ‘Vision 2030’ is looking a lot less clear appeared first on Chemicals & The Economy.
Saudi Arabia’s ‘Vision 2030’ is looking a lot less clear Read More
Its been a long time since oil market supply/demand was based on physical barrels rather than financial flows: First there was the subprime period, when the Fed artificially boosted demand and caused Brent to hit $147/bbl Then there was QE, where central banks gave free cash to commodity hedge funds and led Brent to hit […]
Oil market supply/demand finally begins to matter again as commodity funds withdraw Read More
“By Monday, the third straight day of flooding, the aftermath of Hurricane Harvey had left much of the region underwater, and the city of Houston looked like a sea dotted by small islands. ’This event is unprecedented,’ the National Weather Service tweeted. ‘All impacts are unknown and beyond anything experienced.’” This summary from the New […]
Hurricane Harvey: lack of insurance will hit Houston’s recovery Read More
“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 […]
Oil heads back below $30/bbl as hedge funds give up on OPEC Read More
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 […]
Oil price weakness will unmask reflation and recovery myth Read More
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 […]
Oil prices under pressure as US oil/product exports ramp up Read More
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 […]
US Permian’s shale oil surge highlights OPEC’s failed strategy Read More
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 […]
Oil market rebalancing myth looks close to its sell-by date Read More
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 […]
Oil prices could halve as the speculative bubble starts to burst Read More
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 […]
Speculators’ tail wags oil market dog as paper trading dominates Read More
Oil prices, and those of natural gas, have been on a wild ride over the past year, as the chart confirms. It shows US WTI prices divided by 6, as this enables a comparison with natural gas prices in terms of energy content: Oil prices have come down a long way from their […]
OPEC’s oil output gamble set to face reality as speculative buying peaks Read More
OPEC is living in the past with its recent announcement of new quotas. The simple fact is that the arrival of US shale production means OPEC are no longer the swing producer, able to control the world market. The quotas will have little effect in themselves, as most of the participants will cheat. Instead, they […]
OPEC move supports US oil production rise, and smart meters Read More
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 […]
Futures markets, US shale, the big winners from OPEC meeting Read More
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 […]
3 key questions for the oil market poker game, ahead of OPEC’s meeting Read More
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 […]
ExxonMobil, Saudi Arabia, differ on oil outlook – or do they? Read More
Once upon a time, oil markets were based on facts. Producers and consumers focused on trying to understand what “would” happen”, whilst the speculators placed their bets on what “could” happen. In those days – even 20 years ago, as the chart shows – the role of the speculators on the futures markets was very […]
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) […]
Lack of affordability limits gasoline demand growth Read More
It could be a very difficult H2 for anyone involved in the Asian oil and polymer markets. And given the global importance of these markets, everyone around the world will also feel the impact. The issue is that most business strategies have been based on 2 increasingly unlikely assumptions: Companies all assumed that oil […]
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 […]
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. […]
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 […]
Oil market fundamentals continue to weaken as Glencore buys Read More
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 […]
Naimi finally allowed to retire, Saudi oil policy stays the same Read More
“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 […]
Saudi plans to transform Aramco to energy /industrial company Read More
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 […]
Oil market rally under threat as Doha meeting fails to agree Read More
“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 […]
Hedge funds exit oil price rally as Saudi plans post-oil economy Read More
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 […]
Oil market speculators profit as central banks hand out free cash Read More
Its mid-winter in Russia, and the snow is deep in some parts of Moscow. Meanwhile in Venezuela the economy is close to meltdown, and its hard to find even essentials in Caracas. So it is no real surprise that this month saw their Oil Ministers head for “important discussions” in the warmer climate of the […]
Oil prices remain at pre-2005 levels as inventories rise Read More
Oil markets are the proverbial “canary in the coalmine”. They are showing us what happens when the rose-tinted glasses provided by stimulus policy are removed. Now markets have to return to their true role of price discovery, based on the fundamentals of supply and demand. This makes them very dangerous indeed. Some large players in […]
IEA says market “awash with oil” – debunks bullish myths Read More
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 […]
Prepare for $10-$15/bbl oil as Iran, US return to the market Read More
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 […]
Oil hits $30/bbl – and suddenly, analysts forecast lower prices Read More
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 […]
Chart of the Year – Oil prices return to natural gas linkage Read More
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 […]
US, Iran to sell oil in January as Libya ramps up volumes Read More
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 […]
$25/bbl oil – probably now only a question of “when”, not “if” Read More
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 […]
Group think on oil prices puts company profits at risk Read More
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 […]
Oil price forecasts based on myths, not proper analysis Read More
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 […]
Algorithms drive oil prices up 6%, yet fundamentals remain weak Read More
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 […]
Oil stocks at record levels as demand growth slows, supply rises Read More
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 […]
Impact of $25/bbl oil – free pH Report webinar next Tuesday Read More
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 […]
Oil heads to $30/bbl as Great Unwinding reaches 1st anniversary Read More
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 […]
Iran deal highlights “massively oversupplied” oil market Read More
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 […]
New oil price fall is matter of “when”, not “if”, as inventory builds Read More
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 […]
US futures market rally boosts US and OPEC oil output Read More
Every oil trader has known the feeling. You’ve done your sums, talked to everyone, and decided the market is going to be short of product. So you start buying discreetly, building up inventory to sell in the future at higher prices. But then the messages from other traders start coming: ‘”What would you bid for […]
Speculators’ oil inventories at record 5 days of world demand Read More
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 […]
US Marcellus gas output trebles as drilling rig count halves Read More
“I don’t take the view that they (OPEC) are in any way trying to threaten other suppliers. I think they’re really kind of on a classic price-discovery exercise, which is important for all of us as investors to know.” This was the analysis of ExxonMobil CEO, Rex Tillerson, in Houston last week. And he […]
Most oil producing countries have operating costs below $20/bbl Read More
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 […]
OPEC hit as ‘peak oil demand’ arrives and US imports fall Read More
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 […]
Hedge funds moving away from ‘buy on the dips’ strategy Read More
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, […]
Oil price, China Outlook – free pH Report webinar tomorrow Read More
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 […]
Oil price rally a “Head Fake” says International Energy Agency Read More
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 […]
Oil prices have further to fall as US inventory hits new records Read More
I was kindly invited last week to give a keynote address at the annual ME-TECH conference in Dubai. Naturally, there was intense interest in my argument that oil prices were most unlikely to recover to the $100/bbl level. Instead, I suggested they would likely return to their long-term historical average of $33/bbl (in $2014). And I argued that this would be good news […]
Saudi lets ‘market decide’ on oil prices to maximise local jobs Read More
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 $63/bbl […]
10 day Superbowl oil rally ends with storage tanks close to full Read More
Chemical markets are continuing to signal that the world faces major economic challenges in 2015. The chart above highlights developments since August, when I first forecast that oil prices would see major falls, and that the value of US$ would see ”a strong move upwards“: Benzene, always my favourite indicator for industrial output, has suffered worst, down 56% (green) Brent […]
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 […]
Oil market faces “historic shift” – International Energy Agency Read More
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 […]
A return to lower oil prices is good news for the global economy. But it is bad news for all those who have invested in expanding ethylene production on the assumption that US gas prices would maintain the temporary advantage of recent years. As the chart shows: Oil (blue line) has around 6x the energy […]
US shale gas bubble will end in tears for ethylene expansions Read More
Today’s collapse of commodity prices has the potential to cause a major financial crisis, as I first suggested back in June. In fact, this would now be my Base Case. But companies and investors have been lulled into complacency by unthinking ‘conventional wisdom’. This simply ignored the obvious fact that record levels of commodity prices could only […]
Brent oil prices have reached the “$70/bbl and probably lower” level that I forecast in August. So we now need to think about where they go next. Luckily, the chart above can still guide us, as it has done since September 2010. As readers will remember, I first forecast the collapse on 18 August. I then followed this post with a detailed analysis […]
Oil prices continue bouncing down the stairs to lower levels Read More
I imagine a version of this chart has been keeping ministers awake at nights in Riyadh and the other Gulf Co-Operation Countries (GCC) in recent months. “How did we ever allow Canada to supply more oil than OPEC to the US?” they must be worrying. ”What did we think we were doing?” This might not be quite […]
Gulf countries risk losing US defence shield if oil prices stay high Read More
Does OPEC have a future? Or has it already disappeared as an effective force in oil markets? I am not the only one now asking this question. Saudi Oil Minister Ali al-Naimi asked the same question in the summer, suggesting OPEC Ministers should instead meet once a year, and have occasional videoconferences, adding: “We don’t need a meeting. […]
OPEC’s high prices have accelerated move away from oil to gas Read More
Oil prices should be set by the balance of supply and demand. But as the chart shows, oil markets have instead become dominated by financial players, as pension and hedge funds decided to buy oil as a “store of value“. Before 2000, financial market volume (red line) had been roughly equal to annual oil production (green line). This worked well, providing physical […]
Financial players have destroyed price discovery in oil markets Read More
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 […]
Why did nobody else forecast that the oil price would collapse? Read More
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 […]
Oil prices under pressure as US oil and gas output rises Read More
Our 13th annual World Aromatics & Derivatives Conference takes place in Berlin next week. Jointly organised as always by International eChem and ICIS, it features a must-hear list of speakers: ExxonMobil: Europe Business Director Tim Stedman will give a global market overview Dow Chemical: Global Business Director Pieter Platteeuw will discuss the future for benzene […]
World Aromatics and Derivatives Conference next week Read More
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 […]
Oil price fall set to push Japan back into deflation Read More
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 […]
Oil price fall set to push Japan back into deflation Read More
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 $93/bbl oil price to balance its budget. Most of OPEC needs a higher price. Only Kuwait, UAE and Qatar need […]
The world now faces a supply glut in almost every source of energy, including oil, gas and coal. It is also seeing major increases in output of key products including gasoline, diesel and petrochemicals. Yet as the International Energy Agency has warned, “the recent slowdown in demand growth is nothing short of remarkable.” The blog is therefore launching today a 3-part series […]
Saudi oil policy shaped by defence dependence on USA Read More
The Great Unwinding of the central banks stimulus policies is underway, as discussed last week. Oil markets have been one of the first to feel the change, as the chart shows, with prices finally falling out of the ‘triangle’ shape built up since 2008. The value of the US$, interest rates and the S&P 500 […]
Oil prices break out of their triangle – downwards Read More
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 […]
Europe unprepared for hard winter without Ukraine gas Read More
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. […]
Could the oil price triangle be close to cracking? Read More
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 […]
Oil consumption growth has slowed as prices have stayed high Read More
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 […]
When the world changes, companies either change with it or go out of business. The market for stagecoaches was never the same once cars came along. And not many students use slide rules today, now calculators are available. Usually, of course, these market changes are slow-moving. So companies often fail to respond in the hope the old world […]
ExxonMobil Antwerp to spend $1bn boosting diesel capacity Read More
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 […]
US condensate exports highlight oil market weakness Read More
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 […]
Oil will be left in the ground, as gas gains energy market share Read More
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 […]
Europe faces Russian gas and oil supply risk over Ukraine Read More
Oil futures markets are a wonderful thing, in theory. They are supposed to enable price discovery, whilst their liquidity is meant to enable companies to reduce inventory levels. Instead of tying up working capital, they can simply go to the market and buy what they need, when they need it. But the chart above, of US oil […]
Oil prices vulnerable to China property market fall Read More
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 […]
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 […]
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 […]
European oil travels the world as market complacency increases Read More
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 […]
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 […]
Oil market hype fails to take prices out of their triangle Read More
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 […]
Pension fund speculation boosts oil prices as consumers suffer Read More
Life doesn’t get any easier for Europe’s olefin producers and the consumers who depend on them. As the chart shows, based on latest APPE data, operating rates averaged just 78% in H1. This is almost as bad as H1 2009, …
High oil prices take European operating rates to record lows Read More
Last week should have been a great week for the speculators. As in July 2008, they were able to spread the rumour of imminent Middle East war and upheaval. 5 years ago it was the threat of Israel bombing Iran’s nuclear facilities, and leading to a blockade of the Straits of Hormuz. This time it […]
Speculative Brent rally lifts oil prices just $3/bbl Read More
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…
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…
Brent crude oil prices have now dropped $20/bbl since their February peak at $119/bbl. The major drop has occurred this month, following the Bank of Japan’s decision to introduce its own massive liquidity programme. This confirms the blog’s long-stan…
Japan’s liquidity programme sends oil, gold prices tumbling Read More
Have you ever wondered, as you pay your energy bill or fill the fuel tank in your vehicle, just why oil prices have risen so much on the past decade? The question occurred to the blog when reading a Reuters report of the latest Outlook from the Intern…
"Surplus oil is filling inventories worldwide" – Reuters Read More
Crude oil markets long ago lost their role of price discovery. Since early 2009, they have instead been dominated by pension funds seeking to find a ‘store of value’ as the US$ weakened, along with hedge funds enjoying a money-making ‘momentum play’. …
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…
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…
Fed liquidity boosts oil prices as fundamentals weaken Read More
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…
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):
Oil prices at record level for 2nd successive year Read More
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 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…
Chemical industry operating rates fall as oil prices rise Read More
“Energy efficiency is the cheapest way to meet our energy needs” according to the International Energy Agency. It also has much shorter payback periods than increased use of renewables, according to Capella Festa of the IEA when speaking at our confer…
IEA highlights $18tn of gains from energy efficiency Read More
What happens if prices stay unaffordable for so long, that the consumer eventually stops buying? Younger readers may not remember such a period, as it last happened in the early 1980s, before the SuperCycle began. But it looks as though they may be c…
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…
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…
Oil price speculators drive major petchem volatility Read More
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 …
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 …
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 …
‘High raw material prices are killing some markets’ Read More
A blog reader has kindly forwarded an important new study ‘Golden rules for a Golden Age of Gas’, produced by the International Energy Agency (IEA). It sets out what needs to be done to maintain public confidence in ‘fracking’ and the other techniques…
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…
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…
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…
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:
…
Unilever CEO Paul Polman suggests we are living in a VUCA world, as we discuss in chapter 11 of Boom, Gloom and the New Normal. Volatility, Uncertainty, Complexity and Ambiguity make planning for the future more difficult than for a generation.
Th…
The latest EU olefin operating rates (OR%) were very disappointing, even though they were not a surprise. As the chart shows, ethylene rates were just 81% (based on APPE data). They were far below the 90%+ rates that were normal before the crisis beg…
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…
Saudi warns, again, that oil prices are "too high" Read More
Remarkably, crude oil prices are continuing to trade in their triangle formation. As the chart shows, they tried to break out higher in recent weeks. But there was no follow-through.
The high-frequency traders were clearly hoping the US Federal Rese…
Oil slips back into the triangle, as QE3 is postponed Read More
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…
Cotton prices are falling again, since Monday’s reversal by the Indian government of its proposed ban on cotton exports. India is the world’s 2nd largest cotton exporter, after the USA, with 20% of the market:
• On 5 March, its Textiles Ministry ba…
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…
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…
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…
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…
‘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…
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…
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…
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…
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…
US oil inventories remain close to historical average Read More
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…
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, …
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…
6 months ago, when reporting Q1 results, the blog strongly disagreed with the rosy outlook being offered by most analysts. It warned then that:
“The history of the past 40 years shows high oil prices have always led to:
• An initial boom in volume…
Q3 results show companies cautious over the outlook Read More
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…
Financial markets have become increasingly nervous in recent weeks, since the blog last reviewed developments in global bond markets.
Its conclusion then was that investors are worrying more about return of capital, than return on capital, as we trans…
Our 10th European Aromatics and derivatives conference will take place on 22-23 November.
Co-organised with ICIS, it provides an excellent opportunity for delegates to meet up and exchange views in the critical end-of-year period.
It features the …
Bayer, Shell and Styrolution to speak in Amsterdam Read More
Last week’s New Normal seminar in Houston continued the success of the Singapore and Frankfurt events. It sparked lively debate about the major opportunities for future growth in the New Normal. These include:
• The over-55 age group in the West …
Political, Social concerns drive non-Western companies Read More
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…
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 2012-14 Budget period offers great opportunities, as well as great challenges.
Will companies continue to focus on short-term developments in financial markets? Michael Porter’s Shared Value concept instead offers us a powerful model for creat…
The 2012-14 Budget period offers great opportunities, as well as great challenges.
In the short-term, the challenges may well seem more important.
But they should not blind companies to the fact that the opportunities have probably never been gre…
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…
SUMMARY
The global economy does not seem to be in good shape.
Policymakers seem to fail to grasp the importance of the demographic changes that are underway in both the Western and emerging economies.
Yet demographics drive demand.
The result of thi…
Financial markets continued their start of quarter rally last week. But their volatility amazes even seasoned observers. The US Dow Jones Index has moved at least 100 points in 57 of the last 58 days, for example, whilst crude oil jumped $3/bbl on Fr…
Financial markets party whilst petchems remain weak Read More
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…
Peggy Noonan is the blog’s favourite political correspondent. She used to be President Reagan’s speechwriter, so nobody can accuse her of being a ‘socialist’ or ‘doomsayer’.
Recently, she has been writing some very important columns in the Wall Stree…
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…
The good news about US auto sales last month was that they were the highest September sales since 2007. The bad news was that they were still below the 1.1 million level, which was the minimum monthly sale from 2005 – August 2008.
The reasons for the …
The great film comedy Groundhog Day saw Bill Murray doomed to repeat the same day in his life, until he learnt to become a better person. Sadly, financial markets have yet to learn from his example.
Every quarter, the investment banks produce new sto…
Yesterday’s Scenarios hopefully provided valuable insight into the challenges ahead for companies and individuals. They also suggest some Critical Success Factors for achieving a successful transition to the New Normal, as set out in the chart above:
…
The transition to the new Normal is likely to be painful and long-lasting.
Future demand growth will be slower as the ageing Boomers spend less and save more.
More regular and deeper recessions are likely to become a feature of the global economy o…
Today’s economic situation is getting worse, not better. The blog believes this is because most policymakers still refuse to accept the wisdom contained in the Beatles’ ‘When I’m Sixty-Four’ song on their iconic Sgt Pepper album.
The Western BabyBoo…
Petchem markets are continuing to act as leading indicators for the global economy. The IeC Downturn Alert shows there was no September rebound in orders after the holiday period.
October will have to bring a sudden, and powerful reversal of the do…
The IeC Boom/Gloom Index seems to have done its job.
It was launched in June 2009, as a way of reflecting the extremely positive sentiment then building in financial markets. And as the chart shows, it remained bullish until July (blue column). Sinc…
Auto sales in the world’s 3 main markets (China, USA, EU), saw much slower growth in the past 3 months.
The chart above shows how they have moved in 2011 (red square) versus previous years. It is clear that the stimulus-led boom seen since 2009 has c…
The chemical industry has a turnover of $3.4trn, and is the world’s 3rd largest industry. It matters to the global economy.
Many of its leaders are about to meet next weekend in Berlin for the annual European Petrochemical Association (EPCA) meeting….
Oil supply is critical to today’s global economy.
Now a new book by oil expert Daniel Yergin, author of ‘The Prize’, suggests that the outlook may be more promising than most believe.
Pessimists such as Marion King Hubbert have argued that the world…
An abrupt change of direction is never a pleasant experience in global financial markets. Yet unfortunately, the blog’s regular 6 monthly review suggests this has started to occur since March.
Investors are beginning to fear we may not be be entering…
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 …