Crude oil prices have been rocketing lately. In turn, they have produced the seemingly 'strong' year-end for the chemical industry forecast by the blog in early November.
At this point, there is a clear divergence of view. The blog's bullish friends see this as a sign of a major recovery in demand, and confidently forecast prices over $100/bbl during H1. And, of course, Wall Street will no doubt remain very keen to continue booking its current profits from selling futures contracts to gullible pension funds.
But given the fundamentals of supply and demand, the blog is finding it more and more difficult to believe that prices can rise much further, with global inventories stuck at record levels.
Two arguments suggest we are getting close to the end of the rally:
• China is the major source of demand growth. But as Petromatrix note, its gasoline and diesel prices are at record highs, 41% above early 2008 (due to its 2009 move to better link prices to world levels). Whilst traffic congestion has now led Beijing to restrict new car sales to just 240k in 2011, one third of 2010 demand.
• Equally, the euro's weakness means that European prices are close to record levels. As the chart shows, they are at April 2008 levels of €70/bbl.
The blog is not yet quite ready, as in July 2008, to forecast that the bubble is about to burst, in the absence of geo-political factors.
But it is becoming more and more convinced that prices cannot stay at current levels without something extraordinary happening to either demand or supply.