European petrochemical markets keeping calm and carrying on in light of Saudi attacks

Company Strategy, Economics, Europe, European economy, European petrochemicals, Fibre Intermediates, Middle East, Naphtha & other feedstocks, Oil & Gas, Olefins, Polyolefins, Styrenics, US

Here is a guest post from my very good ICIS colleague, Matt Tudball, our head of European Markets, where he considers the impact on European petrochemicals markets of the drone and cruise missile strikes on Saudi Arabia (see the image below which details the damage inflicted).


ON FRIDAY, at the ICIS Bishopsgate office in central London, we said goodbye to a colleague who was moving to Dubai to head up our Middle East sales team there, and little did he, or we know that his first week in the new role would, literally, start with a bang.

The Saudi Arabia defence ministry said on Wednesday that oil and gas facilities in the country were struck by 18 drones and seven cruise missiles during the attacks on the 14th September.

The impact of the attacks has attracted global media attention, and has kept the ICIS news hubs in London, Singapore and Houston buzzing with stories, impact assessments and analysis from colleagues all around the world as crude oil prices spiked to record highs, dragging naphtha with it. Speculation ran rife as to what this means for the petrochemical markets, future crude oil prices, and the economy as a whole.

However, as we near the end of the week, the view from Europe at least, is that things haven’t really changed that much, and business is carrying on as, well, normal (or as normal as business can be in 2019).

After consuming as much information as I could from the news, I decided it best to speak to the ones who are really getting the pulse of the markets here in Europe, and picked up the phone to my colleagues in the editorial team to see what the market is really saying.

The resounding answer? Not much, at least for now.

As it stands at the time of writing, most of the players in the markets I looked at – benzene and styrene, ethylene and propylene, MEG, and the PE and PP markets – are just waiting to see what impact the drone strikes bring, if any, on European prices.

This is not to say there has been no impact, though. There have been higher offers made in the markets, certainly at the beginning of the week, but the buyers don’t seem to be in a hurry to buy, mainly as inventories are comfortable and demand is not exactly all that strong, as John has already said on this blog.

Some MEG traders, for example, are raising their offers while holding onto material, but no real deals are being concluded right now. There has been some increased interest from the downstream PET markets, but ultimately, the market is well supplied and demand remains below par.

Similarly, in the olefins markets, players there are just watching the developments to get a better understanding of what it all means, especially in relation to the naphtha rise and subsequent drop. Though, with demand the way it is in the European (and global markets), buyers aren’t going to jump to buy volumes.

The European benzene contract price rose in September, well ahead of the attacks, with several factors contributing to the bullish sentiment such as reduced run rates, lengthier outages and unplanned glitches, along with fewer imports and more exports. And while spot prices in Europe were down last week, there is now a more bullish outlook in this market off the back of the attacks, but it waits to be seen if this is just purely sentiment, or if deals will be done at these higher levels as the week and month progresses.

And finally, looking at the European polymers markets things haven’t really changed since last week. European HDPE and LLDPE buyers are pretty much spoilt for choice right now, and PP supply is not causing any sleepless nights currently, so it really will depend on what happens upstream come October feedstock contract discussions. PE traders, like traders in other markets, are holding back on their offers for the time being, though.

Admittedly, the drone strikes might make these upstream talks ‘interesting’ this month, to quote my colleague Katherine, but, like almost every other market, we will have to wait and see exactly what outcome Europe, and the wider petrochemical world, faces from the attacks in Saudi Arabia.


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