I interviewed Paulo Moretti who discussed Chemicals Price Forecast.
Please provide a brief background of yourself
I have worked 35 years at Dow Chemical where I developed experience in diverse areas as: Manufacturing, R&D, Sales, Marketing, Business, Finance, Economic Evaluation, Strategic Planning, e-Business and Purchasing.
Tell us about your more recent article published at MyPurchasingCenter.
I would like to talk about Crude oil price and some derivatives: Ethylene and Propylene,
Since 2012, the peak year for oil prices, Crude Oil prices have fallen, and all chemicals users have enjoyed lower prices for Crude Oil derivatives. However, I believe this scenario will change in 2016 and 2017.
Why do you think the scenario will change?
There are competing theories about the reasons for the Crude Oil price decline. Some conspiracy theorists believe the Organization of Petroleum Exporting Countries (OPEC) wants to financially restrict Iran and ISIS, which are both financed by oil exports. Others believe that OPEC wants to decrease the global oil inventory so the price will increase easily. My own view is that global oil prices declined in order to delay Shale Gas (mainly in the U.S.) investments and further production.
Note: Shale Gas is Natural Gas in a different formation, which is cheaper than Crude.
My view is that the Crude Oil price will reach an average of US$50/BBL in 2016 and US$60/BBL in 2017.
As we all know, supply-demand balance defines the price, and in May, Bloomberg reported that OPEC ministers were “happy with the direction of the oil market” to “eradicate surplus production.” A second indication is the tremendous financial impact on the oil exporters. A recent Deloitte article provides a clear view of the impact on the budgets of oil exporters, showing they need a certain level of oil price in order to balance their internal budgets. Russia, for example, is heavily dependent on its oil revenues, with Oil and Gas accounting for 70 per cent of total export revenues. The country loses about $2 billion in revenue for every dollar fall in the oil price. The only oil exporter with high levels of monetary reserve to support this pricing environment is Saudi Arabia, and all others are struggling.
Based on this scenario, which prices will you predict?
For Crude Oil I believe the avarege price will be US$50/BBL in 2016 and US$60/BBL in 2017, and based on Crude Oil I predict that Ethylene may reach 30 cents/lb in 2016 and $35 cents in 2017, and Propylene around 35 cts/lb in 2016 and 40 cts/lb in 2017.
For now, I propose you check these prices at the end of 2017 to see if I was right. If not, sorry; I just gave my view.
About Paulo Moretti
Principal - PM2Consult