Petchems driven up by high crude as Libya violence escalates

04 March 2011 17:38  [Source: ICIS news]

LONDON (ICIS)--Prices of upstream petrochemicals have continued to surge as intensifying violence in Libya maintains upward pressure on the cost of crude oil, sources said on Friday.

April Brent was trading at $116.06/bbl at 17:00 GMT, up $1.27/bbl from the previous close as supply disruptions in Libya continued and fears remained that political unrest could spread to other oil producing nations in the region.

Tens of thousands of people have held protests across the country in their efforts to force Colonel Muammar Gaddafi to step down from power and reform Libya's government.

Security forces loyal to Gaddafi are reported to have fired tear gas and live ammunition at protesters in the capital of Tripoli, who had taken part in an anti-government march after Friday prayers.

Media reports also said that a Libyan warplane had attacked the rebel-held military base in the town of Ajdabiyah in eastern Libya. Rebels and forces loyal to Gaddafi are embattled in a struggle for control of oil facilities and a key coastal road in the region.

A combination of high crude oil prices and a firmer crack spread have helped push European naphtha prices to $1,006-1,014/tonne. The rise took the average weekly price to $989.50/tonne CIF (cost, insurance and freight) NWE (northwest Europe), the highest level since August 2008.

On Monday this week, European March ethylene (C2) and propylene (C3) contract settlements were agreed up by €60/tonne ($83/tonne) and €80/tonne respectively because of higher upstream crude and naphtha prices, plus a tight supply-demand balance.

The violence was also causing tightness and firmer pricing in the European butane market, as upward pressure on naphtha values has been making butane a more attractive prospect for cracking in the petrochemical sector.

Meanwhile, the extremity of the violence was deterring ship owners from travelling around the region, particularly areas to the east which have been hit hardest by attacks from the Libyan government. No cargoes are thought to be loading or discharging at large petrochemical hubs, such as Marsa El Brega and Ras Lanuf, in the midst of the violence.

In related news, higher oil prices and fuel costs caused a spike in caustic soda freight rates to Africa on Thursday this week. Freight rates from Asia to eastern Africa almost doubled, from $110/tonne last week to $200/tonne this week.

Freight rates to southern Africa from Asia also increased significantly this week, to around $170/dmt for 20,000-tonne loads, up from $110/dmt the previous week, exporters said.

Additional reporting by Jo Pitches, James Dennis, Neha Popat, Mark Victory and Nel Weddle

($1 = €0.72)

For more information on Libya's ethylene, propylene and methanol export position, read Paul Hodges’ Chemicals and the Economy Blog

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