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IEA says oil price collapse could lead to “social upheaval or financial difficulties” in H1

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 […]

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Rubber ball

Oil prices continue bouncing down the stairs to lower levels

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 […]

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Gulf countries risk losing US defence shield if oil prices stay high

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 […]

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OPEC’s high prices have accelerated move away from oil to gas

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. […]

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Financial players have destroyed price discovery in oil markets

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 […]

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

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

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Oil prices under pressure as US oil and gas output rises

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

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World Aromatics and Derivatives Conference next week

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 […]

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Oil price fall set to push Japan back into deflation

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

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OPEC faces New Normal dilemma as oil demand slows

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

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