Oil prices weaken as inventories continue to build

Chemical companies, Economic growth, Financial Events, Futures trading, Oil markets

US oil stocksAug10.pngOil markets are an accident waiting to happen for the chemical industry. Oil inventories around the world are close to record levels, with the IEA (International Energy Agency) reporting they are over 61 days of demand. Equally, as the Petromatrix chart above shows, they are at record levels in the USA (the world’s largest market), and still climbing.

The major investment banks, of course, are still able to make easy money by selling the story of “demand from emerging markets and limited growth in supplies” to gullible pension funds. So it is no surprise that sentiment in the futures market continues to ignore the fundamentals.

But the risk/reward ratio for a bet on oil at $90/bbl in Q4 is starting to look pretty thin. Prices peaked at $83/bbl in early August and in spite of another bullish report last Monday, were down $9/bbl (11%) by the end of last week. So the risk of a price collapse to $60bbl or lower is clearly increasing, and is certainly now above 25%.

If it happened, then clearly OPEC would quickly cut production again. But this would be shutting the stable door after the horse has bolted. So destocking, as we saw in Q4 2008 – Q1 2009 and in 1980, could again become a serious problem for the major chemical industry value chains.

Thus, if the investment banks lose their battle to support oil prices, then the chemical industry may well be left to pick up the pieces.

PREVIOUS POST

Baby-Boomers cut spending, start saving

21/08/2010

Consumer spending is 70% of US GDP. And because US GDP is so large, this means t...

Learn more
NEXT POST

Lower refining rates support EU petchem margins

24/08/2010

Sometimes every cloud does have a silver lining. And that’s currently the ...

Learn more
More posts
Chemicals in the eye of the storm as UK heads for a WTO Brexit on 1 January
18/10/2020

On Friday, the UK premier confirmed what many of us have expected for a long time. There is unlikely...

Read
Pandemic redraws the map
11/10/2020

  Companies have entered a new landscape where the coronavirus has accelerated major paradigm s...

Read
What will happen if President Trump loses the election?
04/10/2020

I spent from September 2015 onwards, during the last US Presidential election, trying to explain why...

Read
Covid fears risk a Great Depression and major social unrest
27/09/2020

Governments spent most of February/March ignoring my warnings here on the dangers posed by the Covid...

Read
Chemical industry has key role in helping to create a more sustainable world
20/09/2020

The chemical industry has a critical role to play in enabling the world to “build back better&...

Read
The state of the global economy in 2020
13/09/2020

Last Wednesday, I gave the opening presentation for the ICIS PET Conference and looked at whether th...

Read
Reality dawns for business as No Deal Brexit approaches
06/09/2020

I warned before the June 2016 Brexit referendum that Brexit was all about politics, and Boris Johnso...

Read
Local circular plastics solutions to replace mega projects business model
30/08/2020

NEW YORK (ICIS)–There will be a paradigm shift away from mega crackers producing massive volum...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more