21 October 2009 06:28 [Source: ICIS news]
SINGAPORE (ICIS news)--Asian petrochemical prices have either stabilized or started to move up in line with strong crude values and helped by China’s return to the market after an eight-day absence, industry sources said on Wednesday.
Crude was trading at close to $79/bbl (€52.9/bbl) levels on Wednesday after surging past $80/bbl on Tuesday as investors have been dumping the US dollar in favor of riskier assets such as commodities and equities, analysts said.
Demand for petrochemicals is once again supported by
“Crude price is a wind vane for downstream petrochemical demand now. [Petrochemical product] prices will increase in line with the crude values although demand has not improved much post-holidays,” said Li Guangzan, a petrochemical analyst from Zhejiang-based brokerage Founder Securities said.
Li warned that prices could fall as easily without strong demand to back it up.
The weeks leading to
“[China's] Domestic demand for petrochemicals is recovering gradually. And the rising crude prices will give support for chemical products like polypropylene, polyethylene and styrene monomer,” said Wang Xixin, an analyst from Wuxi-based Guolian Securities.
Benzene spot prices in
“This is an ironic price trend compared with the traditionally weaker fourth quarter,” said a key Korean producer.
Regional aromatics plants that cut production in anticipation of weaker demand this month may consider running at full capacity again if crude continued to spike, said a key Chinese producer.
At 01.13pm (0621 GMT), NYMEX light sweet crude for December delivery was down 29 cents at $78.83/bbl following data showing a bigger-than-expected build in US crude inventory.
“It would be premature to say the [oil price] peak has been reached for the year given that we are only just slightly below the [2009 high],” said David Moore, chief commodity strategist at the Commonwealth Bank of
“At the moment the market sentiment is very bullish, partly due to anticipation of international economic recovery,” he added.
With growing evidence that global economic recovery is under way, investors have started moving away from safe-haven investments like treasuries, leading to weakness in the US dollar.
“In general, we should expect more dollar weakness, simply because things are getting better. People are moving out of a risk-averse environment as conditions in the financial markets improve,” said Thomas Lam, Singapore-based senior treasury economist at United Overseas Bank.
Crude’s rally is a major cost-push factor that drives up petrochemical product prices.
Regional styrenic resins prices may remain high in November and December because of firm raw material costs, said a Taiwanese producer.
Buyers of plastics hope to buy at lower prices but resins values were unlikely to ease, given firm crude numbers, said a trader in
Meanwhile, November spot offers for non-oil grade 1502 styrene butadiene rubber (SBR) have been raised by $50/tonne to $1,850/tonne CIF (cost, insurance, freight) China on hopes that
“We have received several enquiries from Chinese traders and distributors for SBR since their return from the holidays. The Chinese buyers are re-stocking as they expect SBR prices to rise further, given the strong crude price, which has hit $80/bbl,” a Korean SBR producer.
Base oils in Asia have stayed mostly stable this week after
While the current demand-supply fundamentals do not justify price hikes, ExxonMobil’s move may push November base oils values higher, regional buyers and sellers said.
To some, however, October could just well be a good opportunity as any to nudge up prices.
“It’s not so much of the higher crude values. It’s the last chance for the producers to push up prices before the lull period in December, where order books close for the year-end stock taking],“ said an adipic acid buyer.
Sustaining gains in the crude market remains tricky at this point, with some analysts expecting prices to pull back below $70/bbl before the end of the year.
“I believe there is adequate oil supply to meet demand, but there are other factors at work in crude market, like the weakness of the US dollar and people’s expectations of international economic recovery. Those other factors have remained mostly supportive of the oil prices,” said CBA’s
($1 = €0.67)
With additional reporting by Heng Hui, Helen Yan, Clive Ong, Anu Agarwal, Ong Sheau Ling
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