Bullish crude to have limited impact on Asian petchems -analysts

08 March 2010 07:22  [Source: ICIS news]

SINGAPORE (ICIS news)--The recent bull run in crude values is expected to have a limited effect on Asian ethylene prices due to the current weakness in supply fundamentals, analysts said on Monday.  

“The bullish crude run at this moment has no impact on olefins in Asia,” said Yim Jinsu, a consultant with Chemical Market Associates Inc (CMAI) in Singapore.

NYMEX light sweet crude for April delivery was hovering close to the $82/bbl mark in early Asian trade on Monday, driven mainly by the US Labor Department’s report showing fewer-than-expected job losses in February, said Victor Shum, an analyst with energy consultancy Purvin & Gertz in Singapore.

Spot ethylene prices had fallen below $1,200/tonne (€876/tonne) CFR (cost and freight) in northeast (NE) Asia in the week ended 5 March, according to global chemical market intelligence service ICIS pricing.

Ethylene prices were expected to “remain weak” until the end of 2010 due to increased availability from capacity expansions in Thailand and Singapore, despite growing spreads since the fourth quarter of last year, Yim said.

“Ethylene (spot) prices have been falling since two weeks ago despite the increase in crude,” he added.

Overall, the increase in crude values would have “little or no impact whatsoever” on petrochemical product prices as oil prices were racing too far ahead of fundamentals, Shum from Purvin & Gertz said.

Petrochemical producers would also try to maintain product prices at current levels to improve profit margins which have been diminished by higher crude prices, thereby muting the effect of oil price hikes considerably, Wang Hua an analyst from Dalian-based brokerage firm Bohai Futures Company said.

However, petrochemical prices could rise in the near term if the global economy showed further signs of recovery, Wang added.

Crude values were expected to climb further in the near term due to improving economic conditions in Asia, Shum said, citing strong performances in regional equity markets in the past week and on Monday.

However, a further surge in crude prices could be checked by an excess of supply in the market.

“There is still a lot of unwanted [crude] supply in floating storages and onshore tanks. The supply overhang and improving refinery operating rates means that we do have a surplus situation now,” he said.

“Fundamentals will kick in eventually and put a lid on it (crude prices),” Shum added.

 ($1 = €0.73)

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By: Nurluqman Suratman

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