Global crude oil demand for petchems booming – IEA

LONDON (ICIS)–Despite initial signs of a slowdown in general demand growth for crude, demand from the petrochemical sector has recorded highs in the fourth quarter of 2015 with gains in several countries in all continents, the IEA said on Friday.

In Europe, the “previously beleaguered Italy” posted in October its ninth consecutive month of rising demand for crude oil, year on year, with “strong gains” in the petrochemicals and jet transport markets.

In Japan, and despite crude demand falling by 3.5% in October year on year, gains were posted in naphtha demand, coming predominantly from additional petrochemical demand, according to the IEA.

Equally, China’s “ailing industrial oil use” was sufficiently offset by “sharp increases” in the country’s liquefied petroleum gases (LPG) requirement as petrochemical feedstock, said the Paris-based Agency.

Saudi Arabia’s major petrochemical complex Sadara, a joint venture between the country’s oil major Saudi Aramco and US chemical major Dow Chemical, also boosted demand for crude aimed at petrochemical production.

“Lower oil prices dampen Saudi Arabia’s potential economic spend and, in turn, the country’s own oil use, a downturn that is eased as additional petrochemical demand from the Sadara facility in Jubail provides an offset,” said the IEA.

“Previous reports from the company stated that a mixture of 70% naphtha and 30% ethane would be used as the principal feedstock at the facility.”

Strong demand from petrochemical producers in Korea, India, Singapore and China also drove Asian naphtha cracks to breach $10/bbl in late November, their highest levels in over 10 years according to the IEA.

In summary, the IEA said the petrochemical demand in all regions is boosting naphtha producers’ margins and profits, who also benefited during November from weakened crude spot prices.

“Plentiful inventories and increasing supply as refiners exited turnarounds weighed heavy. Products at the top of the barrel fared best; naphtha cracks hit multi-year highs in all regions buoyed by high petrochemical demand, while gasoline cracks firmed in the Atlantic Basin on export demand,” the IEA concluded.