Iran-West Nuclear Deal Could Boost Naphtha Cracking

Aromatics, Business, Company Strategy, Europe, European economy, Japan, Naphtha & other feedstocks, Oil & Gas, Olefins, US

Iran-Nov132

By John Richardson

THE blog has met many Iranian delegates during its seven years of working for ICIS Training and visited the country a couple of times during the early 2,000s. We love the people and the country, but not some of the politics on both sides.

And so it was great news to hear about the initial nuclear deal between Iran and the West. If this is followed through with a final resolution of the dispute, and some the doubts surrounding shipping and insurance are removed, then we could see a big increase in the country’s ability to export petrochemicals as sanctions are fully lifted.

There are already unconfirmed reports that trading offices are being re-opened in Tehran in anticipation of the sanctions being fully removed.

Longer term, of course, also, Iran has huge unexploited gas reserves. We shouldn’t get ahead ourselves, it is early days yet, but its refining sector is badly in need of investment.

At the moment, benzene, tolune and xylenes are still being diverted from chemicals use into gasoline blendstock because of both lack of investment in local refining capacity and the sanctions that are making it difficult to import gasoline.

Further down the line, we might even see more investment in the country’s petrochemicals sector.

But more immediately, as fellow blogger Paul Hodges points out in this post, the greater implications will be for the oil price that has been significantly supported by all the Iranian-connected geopolitical issues, including the 1979 revolution, the Iran hostage crisis and more recently, of course, the nuclear showdown.

And he adds: “Oil prices have [also] been boosted since 2009 by fear over potential supply shortages and [economically toxic} speculation funded by the central banks.  Now, both influences may be about to disappear, if the Iran dialogue continues to develop and the US Federal Reserve starts to ‘taper’ its spending.

“This would be very good news for chemical companies, as it would likely move oil prices back down towards their historical parity with US natural gas prices.  It would also be very good news for Iran’s long-suffering population.”

As we discussed last month, naphtha cracking, for all sorts of reasons, is far from being dead in the water.

A lower oil price could thus reinvigorate both the European and Asian petrochemicals industries, forcing some analysts, who are talking about plant closures, to go back to the drawing board. A lower oil price would support the political drive to save plants.

And for the US, what might this mean for the relative competitiveness of all its gas-based cracker projects?

As we said, though, it’s early day yet, but contingency planning is needed about how the petrochemicals competitive landscape might change.

PREVIOUS POST

Regional Trading Blocs: Globalisation In Reverse

25/11/2013

By John Richardson HAS anyone out there considered the possibility that we could...

Learn more
NEXT POST

The Iran-West Nuclear Deal: An Update

27/11/2013

By John Richardson MANY thanks to a good friend of the blog, Mark Mark Mirosevic...

Learn more
More posts
European petrochemical markets keeping calm and carrying on in light of Saudi attacks
19/09/2019

Here is a guest post from my very good ICIS colleague, Matt Tudball, our head of European Markets, w...

Read
Global PE market to remain long despite Saudi cutbacks caused by drone attack
17/09/2019

By John Richardson TRADERS lucky enough to be holding long positions in PE ahead of the 14 September...

Read
Risk of stagflation and recession from drone attack on Saudi oil facilities
17/09/2019

By John Richardson ANY major change in US government foreign policy always carries major risks becau...

Read
Drone attack on Saudi oil facilities: Substantial investment required to avoid a repeat
16/09/2019

The views expressed below are personal and do not express the views of ICIS Here is a another blog p...

Read
President Trump can only cause major economic damage by beating China, unless he has a time machine
12/09/2019

The views in this blog, are, as always, my own personal views and don’t reflect the views of I...

Read
Unsustainable boom in China auto market ends as sales of new vehicles move permanently lower
08/09/2019

By John Richardson THERE IS a big temptation when making forecasts of becoming too excited about the...

Read
Global PP demand could be 81.5m tonnes less than forecast in 2019-2028 as China Debt Supercycle ends
05/09/2019

By John Richardson SOME PEOPLE argue that despite the rapid rise in Chinese consumer debt over the l...

Read
China economic stimulus and PP: How global demand could have been 71m tonnes smaller
04/09/2019

By John Richardson CHINA came to the rescue of the global economy in 2009. This wasn’t for altruis...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more