Oil market developments need very careful attention. If prices do now fall below $50/bbl, then central banks will likely rush to make major cuts in interest rates. And that will make deflation even more likely.
Chemicals and the Economy
OPEC+ risks losing control of oil markets
Oil traders have built a record bearish position in oil futures, as they expect consumption growth to stay weak. So it would be no surprise at all to see prices fall towards the $50/bbl level.
Oil prices head into a warning triangle again
OPEC+ countries have been playing the geopolitical card for the past 2 years. But their output cuts have allowed US producers to gain market share, with production up 1.2mbd. The hurricane season may support prices for a while. But the risks are all to the downside.
Hurricanes and Houthis pressure global supply chains and add to inflation risk
The Houthi attacks and increased hurricane risks highlight how geopolitics are replacing economics as the key driver for decisions. Global supply chains are increasingly being replaced by local-for-local operations as producers aim to improve reliability and control costs.
‘Car Wars’ begin as US, EU and Turkey impose duties on Chinese electric vehicles
Europe and the USA are unlikely to handover the EV market to China. And so today’s Car Wars may well led to further tariffs on both sides.
The next few years could well be a bumpy ride for anyone involved in the auto industry and its supply chains.
OPEC+ starts to refocus on market share as demand growth weakens
OPEC would have been better advised to keep prices low to reduce non-OPEC supply. Instead, they are likely to face some difficult pricing decisions later in the year, if global growth continues to slow.
Oil and financial markets start to wake up to geopolitical reality
The oil price has rallied 22% over the past 4 months, since it bottomed at $74/bbl. And slowly but surely, traders are being forced to realise that geopolitics are replacing economics as the key driver for world markets.
Food costs and interest rates rise as energy and fertilizer supplies are hit by the invasion
It’s going to be a very difficult winter. Most of the world will be impacted as Europe bids up energy/food prices to keep its people warm and fed. And it would never have happened if policymakers had recognised the importance of geopolitics, energy markets and demographics.
Prepare for the coming crisis
As the head of Germany’s Employers’ Associations warned last month: “We are facing the biggest crisis the post-war Federal Republic has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years”.
IMF warns the risks “for the economy are overwhelmingly tilted to the downside”
Millions of people around the world are already having to cutback on buying food for their families due to today’s high prices. By wintertime, the risk is that they will have to choose between buying food or heating their homes.
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