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“.