6 months ago, the blog suggested that normal seasonal demand patterns could resume in 2010. And it optimistically forecast "a strong H1", on the basis that "consumers should need to restock ahead of the usual Q2 demand peak in autos/construction".
This optimism was based on the American Chemistry Council's excellent analysis of polymer demand, which indicated a likely turn in the inventory cycle. And the ACC's latest report (above) shows inventories (red line) have indeed risen sharply, ahead of demand (blue line). In turn, of course, this has led to a welcome improvement in company results.
The blog also suggested that we would then see a "slower Q3 holiday season", and this still seems a likely outcome. But it also worried about the risk from crude oil pricing, and the 'correlation trade'. And this has become a greater worry in recent weeks, as prices have tumbled.
The problem is that too many pension funds have rushed to invest in crude oil, based on a belief in an eternal boom in China. This has led to bumper profits for the trading and storage community, as storage tanks around the world have been filled with oil and oil products.
But now prices are beginning to fall. And worries are appearing about the pace of growth in China, as the government seeks to cool overheated housing and construction markets. There is therefore a real prospect that prices could continue to fall to $60/bbl, as the funds realise their mistake.
If this happens, then we may well see an element of destocking down the value chain, in addition to Q3's seasonal weakness.