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 […]
Chemicals and the Economy
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 […]
The China middle class myth moves us closer to protectionism
Believing conventional wisdom can destroy your profits. One example is playing out in the oil market before our eyes. Another example is the myth that China was about to become middle class. Yet income levels always made this impossible: More than 9 out of 10 Chinese earn less than $20/day By comparison, the basic state pension in the UK is 25% higher, at over […]
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 […]
Why have oil prices fallen? Will China’s growth recover in 2015?
Chemistry & the Economy: 2014 Year-End Review Some excellent questions have already been submitted for my year-end webinar tomorrow with the American Chemical Society. Why have oil prices fallen? Will China’s growth recover in 2015 – and if so, will it be back to the ‘bad old ways’ of stimulus? Why are the stock prices […]
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. […]
Blog readers were prepared for this headline on 18 August
Above is today’s front-page headline from the Financial Times. As readers will remember, I launched a series of major posts in the blog on 18 August, forecasting a collapse of oil prices to “$70/bbl, and probably lower“, and that the US$ would see “a strong move upwards“. The headline confirms I was right. The posts in the series were as follows: […]
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 […]
Asian markets panic as polyethylene glut begins to develop
The word “panic” crept in to ICIS chemical market news reports this week, as its pricing specialists surveyed the Asian market. Polyethylene (PE) was particularly highlighted, with headlines such as: China PE tumbles $30-80/tonne on panic-selling Price war in Pakistan as panic sets in among PE suppliers At the same time, ICIS was reporting that: “Middle East suppliers may […]
Major investors worry about markets, focus on demographics
I had a breakfast meeting yesterday with the investment head of one of the world’s major asset managers. He wanted to understand more about our Great Unwinding concept, and our correct mid-August forecast of $70/bbl oil prices. After that, we went on to discuss two critical and related areas: Would the oil price stay at today’s […]
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