15 September 2008 06:52 [Source: ICIS news]By Bohan Loh
SINGAPORE (ICIS news)--Petrochemical trading in Asia seems to have slowed down following the sharp fall in crude oil values to six-month lows of around $99/bbl as Hurricane Ike caused little damage to key Gulf facilities over the weekend, sources said on Monday.
At 11:00am local time (03:00 GMT), October NYMEX light sweet crude futures were trading at $99.51/bbl down $1.67/bbl, representing a more than 30% drop from historical highs of over $147/bbl in July.
At the same time, October Brent on London’s ICE Futures was trading at $96.41/bbl, down $1.17/bbl.
Market watchers said oil prices could fall further in view of the weakening global economy, but the Organisation of the Petroleum Exporting Countries (OPEC) may take measures to curb the price slide.
"Certainly there is risk of further declines. After all it shot up a lot faster than people anticipated. Maybe we can see further reversal," said David Cohen chief economist of consultancy firm Action Economics.
"One question is whether OPEC would step in production cuts to enforce a floor on the prices," he said, adding that the organisation had not been particularly aggressive in its recent production cuts.
As players expected a further fall in crude prices, downstream petrochemical producers were concerned that the poor demand and trade conditions could prolong.
"Weaker oil prices will also weaken demand downstream as buyers want to wait and see longer," said a Singapore-based olefins trader referring to ethylene prices which were hovering at six-month lows of $1,185-1,215/tonne CFR (cost and freight) northeast (NE) Asia
"I don’t know where the bottom is now," he added.
Demand for Asian solvent-grade xylene was weak as traders expected it to fall below $900/tonne FOB (free on board) Korea following the fall in crude oil prices.
Trade situations were largely similar and persistently dull in the regional polymer cluster.
"Although August-September is traditionally the peak demand season in India for polymers, buyers are holding back due to uncertainty about the future direction of prices triggered by the fall in crude values," a polypropylene (PP) converter said
Another polystyrene (PS) producer in India said it was still waiting for pre-festival buying to kick off. "We were expecting demand from the electronics segment to pick up in late August or early September, but there are no signs of that yet," it added.
A Thailand-based polyethylene (PE) producer said it was assessing the impact of the fall in crude prices on the PE market and that it was likely to reduce its offers for October shipment.
"As long as crude values continue to slide, buyers will be circumspect about building high inventories, as they think prices could fall further in tandem with crude," said a Karachi-based trader.
The oil price fall was however, a welcome relief to economies reeling from high inflation. "At $100/bbl, it is a lot less of a drag. Maybe we will see some equilibrium in there, prices getting at $90-100 range," said Cohen from Action Economics.
Prema Viswanathan, Peh Soo Hwee, Pearl Bantillo, Chow Bee Lin, Mahua Chakravarty contributed to this article
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