Crude stabilises as Goldman suggests $130/bbl target

D'turn 27May11.pngWeek 5 of the IeC Downturn Alert saw more stability in the markets. This was largely due to the efforts of the major investment banks. JP Morgan, Goldman Sachs and Morgan Stanley all issued ‘buy’ notes on crude oil, suggesting prices would soon return to $130/bbl, whilst Barclays said its current $102/bbl forecast was “conservative”.

These banks have been active in persuading investors that commodities are a safe investment asset. Their profits would take a hit if this confidence was ever shaken. But as the chart shows, they achieved relatively little ‘bounce’ in the markets, despite ‘wall-to-wall’ coverage of their views in financial media:

• Brent (red dotted line) rose only $3/bbl in a quiet market
• Benzene Europe (yellow) fell $7/t and is down 10%
• HDPE USG (purple) was stable, down 7%
• PTA China (blue) fell $9/t and is down 10%

Petchem buyers clearly did not seem to share the bankers’ viewpoint.

ICIS news noted in Asia that naphtha “demand is decreasing and the outlook is bearish“, adding “its very difficult to find buyers these days“. Whilst in polymers, they reporteda loss of buyer confidence and subsequent slowdown in demand (which) appears to have occurred on a global scale, freeing up the availability of certain grades dramatically“.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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