Uncertainty grips New Year trading

D'turn 14Jan12.pngMarkets are worryingly quiet for the start of a New Year. There is some restocking underway, but the main interest lies in the crude oil market.

Since Brent peaked in April, there has been a clear pattern each month:

• Prices have peaked at the start of almost every month
• The only exceptions have been July and October
• They have then slipped lower by the end of the month

So players have been busy ‘talking up’ the market since New Year, to see if they can catch unwary buyers. If the pattern holds, they will then ‘talk down’ the market in the 2nd half of the month.

Actual price movements since April have been minimal – with a range of $103 – $118/bbl. So this type of tactic is the only way for players to earn a decent bonus. Their aim is simple – to buy at the end of each month, and then resell at the start of the next month.

Meanwhile, back in the real world of petchems, uncertainty rules.

Some hope that China will boost demand once Lunar New Year is over. Others, particularly in the USA, hope that consumer demand might be improving. But in Europe, there is little optimism. France and Austria lost their AAA ratings on Friday, and Greece moved closer to default.

The chart shows market developments over the past year. Product price changes since the 29 April peak, with ICIS pricing comments, are below:

HDPE USA export (purple), down 18%. “The delta between China and US prices was still too wide to generate much interest in US product”.
Naphtha Europe (brown dash), down 16%. “Low activity levels, with high prices still having an impact on demand”.
PTA China (red), down 14%. “Surging feedstock paraxylene (PX) prices supported PTA prices”.
Brent crude oil (blue dash), down 10%
Benzene NWE (green), down 9%. “Upward movement was primarily crude driven, as demand from key sectors such as styrene and phenol has so far remained sluggish to average “.
S&P 500 Index (pink dot), down 6%

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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