Base oils

DUBAI (ICIS)–Importers in the Middle East are being hit by surging costs of transporting goods by land through Saudi Arabia from the Jebel Ali port in the UAE a shipping crisis in the Red Sea to the west of the region. Increased demand meets truck shortage Polymer market activity slow to pick up after Eid holidays Logistics woes may spill into Strait of Hormuz as tensions escalate Buyers in Jordan, Syria and Israel have been relying more on this route to take cargoes coming in from elsewhere in the world. Most shipping companies avoid the Red Sea fearing attacks on commercial vessels by Yemen’s Houthi militants since late last year following the outbreak of the Israel-Hamas war. GCC suppliers are the main exporters of PP and PE to the East Mediterranean region and have been selling most of the material through truck via Saudi Arabia, with limited quantities sold via the CFR (cost & freight) Aqba route. The Red Sea, which has the Suez Canal in the north, offers the shortest route between Asia and Europe and shipping access to the East Mediterranean markets. From the Jebel Ali port in Dubai to Jordan, land freight has more than doubled in recent months, a Jordanian trader said. ”We’ve seen jumps from $60-70/tonne [trucking] cost from Jebel Ali, to Jordan, via Saudi Arabia, to … as high as $150/tonne when ordering non-prime material for both PP and PE  from a major UAE-based supplier,” the trader said. The Middle East observed the Muslim fasting month of Ramadan from 10 March, during which working hours were reduced, culminating with the Eid ul-Fitr holiday during the second week of April. “Now that we are back from Eid, the expectations are towards some decreases in the [land freight] costs,” the trader said. In March, the spike in freight cost was due shortage of trucks following a sharp spike in demand to transport essential goods by land for Israel from Jebel Ali via Saudi Arabia. This shortage was exacerbated by Saudi Arabia’s existing ban on trucks older than 20 years from transiting through its territories, which came into effect in 2023. Trucking demand for polymer cargoes from Oman and the UAE to Egypt via Saudi Arabia also increased, causing a sharp increase in freight cost. “The cost of [transporting] polymers by truck to Egypt was around $80-100/tonne before March, but it increased to $120-140/tonne ahead of Ramadan Season,” a regional trader said. Saudi Arabia’s own cost of transporting polymer cargoes, however, was not affected, market players said, despite a lot of trucks mobilized since the beginning of the year to transport material inland from plants located on the west coast to ports situated on the east coast, so be able to ship them to customers in Asia. Overall polymer market activity has yet to pick up as the Gulf Cooperation Council (GCC), East Mediterranean, and North African markets are just returning from the Eid holiday. Concerns are now shifting toward repercussions of a potential full-on war between Iran and Israel, which could further impact logistics in the region, specifically in the Strait of Hormuz, which could cause oil and feedstock prices to soar. Explosions in Iran, Syria and Iraq were reported early on Friday, causing oil prices to surge by more than $3/barrel in early trade, with Brent crude breaching $90/barrel before easing down. According to media reports, Israel was behind the explosions in Iran. The Strait of Hormuz, which connects the Gulf of Oman and the Persian Gulf, is bordered by Iran, Oman and the UAE. It is an important chokepoint for energy trades from the Middle East. On 13 April, Iran’s Revolutionary Guards seized Portuguese-flagged container ship MSC Aries in the key shipping lane which Tehran says is linked to Israel. On the same day, Iran had launched drones and missiles on Israel, which it blames for a fatal attack on an Iranian diplomatic facility in Damascus that killed a high-ranking member of Iran's Islamic Revolutionary Guards and eight other officers. Focus article by Nadim Salamoun and Pearl Bantillo Click here to read the ICIS LOGISTICS topic page, which examines the impact of shipping disruptions on oil, gas, fertilizer and chemical markets.

19-Apr-2024

SINGAPORE (ICIS)–Shares of petrochemical companies in Asia slumped on Friday, while oil prices surged amid escalating tensions in the Middle East following reported explosions in Iran, Syria and Iraq. Japan’s Nikkei 225 falls 2.66% at close of trade Brent crude briefly crosses $90/bbl; oil eases off highs Israel behind Iran explosions – reports At 07:24 GMT, Asahi Kasei Corp and Mitsui Chemicals were down by 1.31% and 1.98%, respectively, in Tokyo, as Japan’s benchmark Nikkei 225 shed 2.66% to close at 37,068.35. In Seoul, LG Chem fell 2.11% as South Korea's KOSPI composite fell by 1.63% to 2,591.86. Hong Kong's Hang Seng Index slipped by 0.98% to 16,226.07. In southeast Asia, PETRONAS Chemicals Group (PCG) slipped by 0.44% while Siam Cement Group (SCG) was down 2.69%. High oil prices will continue to squeeze margins of petrochemical producers, which are struggling with poor demand and overcapacity. Middle East markets in Saudi Arabia, Kuwait, Bahrain, and Qatar could mirror the movement in Asia when they open on 21 April. Regional bourses are closed on Fridays and Saturdays. Oil prices pared earlier gains in the afternoon trade in Asia after surging by more than $3/barrel earlier in the session, following reports by various media outlets in the Middle East of explosions in Iran, Syria, and Iraq.   "If these reports turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions," said Dutch banking and financial information services provider ING in a note on Friday. Overnight, oil prices settled mixed following a sell-off early in the week as financial markets discounted fears of a war between Israel and Iran that could disrupt crude supplies. Explosions were heard around the central city of Isfahan early on Friday, Iranian media reported, adding that three drones were destroyed after the country's air defense systems were activated. Isfahan houses a significant military airbase, and the province is host to numerous Iranian nuclear facilities, among them the city of Natanz, which is central to Iran's uranium enrichment efforts. Iran's state-run Press TV in a report said that "important facilities in the Isfahan province, especially nuclear facilities, are completely safe and no accidents have been reported". Iran initially closed its airports in Tehran, Shiraz and Isfahan after the attack but has since re-opened them. "Normal operations have resumed for flights at Iranian airports including Imam Khomeini International Airport and Mehrabad International Airport in Tehran after temporary delays," Press TV said, citing the Iran Airports and Air Navigation Co. Elsewhere, Iran’s official IRNA news agency said a series of explosions in Syria targeted military sites. In Iraq, meanwhile, explosions were reported in the al-Imam area of Babel. The reports have sparked worry that Israel has retaliated against Iran's drone attacks last week. Iran launched the strikes on 13 April in response to a suspected Israeli airstrike on Iran's consulate in Syria at the start of the month. Prior to the news of Friday's attacks, Iran's Foreign Minister Hossein Amir-Abdollahian issued a warning during an interview with US broadcaster CNN on Thursday that Iran would respond "immediately and with maximum intensity" to any Israeli aggression. Focus article by Nurluqman Suratman Additional reporting by Nadim Salamoun

19-Apr-2024

SINGAPORE (ICIS)–Oil prices surged by more than $3/barrel in Asian morning trade on Friday, with Brent crude crossing above $90/barrel before easing midday, amid heightened fears of supply disruption following unofficial reports of explosions in the Middle East. ($/barrel) Contract Low High Open Last (at 03:17 GMT) Previous Settlement Change High Change Brent June 86.85 90.75 87.04 89.42 87.11 2.31 3.64 WTI May 82.47 86.28 82.62 84.76 82.73 2.03 3.55 "If these reports turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions," said Dutch banking and financial information services provider ING in a note on Friday. Overnight, oil prices settled mixed following a sell-off early in the week as financial markets discounted fears of a war between Israel and Iran that could disrupt crude supplies. On Friday, various media outlets in the Middle East reported explosions occurred in Iran, Syria, and Iraq. Israel has launched a missile attack against a site in Iran, according to US broadcaster ABC News, while Iran’s semi-official Fars news agency has reported explosions in Isfahan province with state television reporting flights in several cities have been suspended. Isfahan houses a significant military airbase, and the province is host to numerous Iranian nuclear facilities, among them the city of Natanz, which is central to Iran's uranium enrichment efforts. Iran’s official IRNA news agency said a series of explosions in Syria targeted military sites. In Iraq, meanwhile, explosions were reported in the al-Imam area of Babel. The reports have sparked worry that Israel has retaliated against Iran's drone attacks last week. Iran launched the strikes on 13 April in response to a suspected Israeli airstrike on Iran's consulate in Syria at the start of the month. Prior to the news of Friday's attacks, Iran's Foreign Minister Hossein Amir-Abdollahian issued a warning during a interview with US broadcaster CNN on Thursday that Iran would respond "immediately and with maximum intensity" to any Israeli aggression.

19-Apr-2024

SINGAPORE (ICIS)–Two US officials confirmed to BBC News and partner CBS News in the US that an Israeli missile hit Iran on 19 April. Benchmark Brent crude oil has jumped more than 3% to around $90.60 a barrel as reports filtered out of a strike. Iran or Israel have not reported any attacks via official websites. The official Iran FARS news agency in Iran said that air defence systems have been activated in response. Commercial flights in the Gulf region have been diverted and suspended for Emirates Airlines, according to notices, and over Iranian cities, including Isfahan where explosions this morning were reported by Iranian media.

19-Apr-2024

SINGAPORE (ICIS)–Buying activities in the Asia and Middle East polyethylene terephthalate (PET) markets remained relatively need-based, with factors like geopolitical tensions and uncertainties in freight rates clouding sentiment. Asian market sentiment mixed, PET tracks upstream closely Uncertainty around freight rates leads to need-based buying Mideast buyers’ inventories high, but some replenishment expected post-Eid break In this chemical podcast, ICIS editors Damini Dabholkar and Zachary Tia discuss recent market conditions with an outlook ahead in Asia and the Middle East. ICIS will be at the Chinaplas conference in Shanghai from 23-26 April. Please get in touch with our team there for more discussion on the PET market.

18-Apr-2024

SINGAPORE (ICIS)–Oil prices rose on Thursday, reversing sharp losses in the previous session, after the US re-instated oil sanctions on Venezuela, and amid discussions by the EU about implementing new restrictions on Iran. EU leaders mull fresh sanctions against Iran at Brussels summit Market uncertainty tied to potential Israeli response to Iran Poor economic data from China cap crude gains Product ($/barrel) Latest (at 04:27 GMT) Previous Change Brent June 87.57 87.29 0.28 WTI May 82.87 82.69 0.18 Both crude benchmarks fell overnight by nearly $3/barrel on demand concerns, with the US showing a higher-than-expected build in crude inventories. The US on 17 April announced it would not renew a license expiring on Thursday which had previously eased sanctions on Venezuelan oil, opting to re-instate punitive measures due to President Nicolas Maduro's failure to fulfill his election commitments. The US’ six-month sanctions relief for Venezuela took effect on 18 October 2023. Meanwhile, EU leaders are in Brussels, Belgium for a two-day summit (17-18 April) to discuss intensifying sanctions against Iran following Tehran's missile and drone attack on Israel on 13 April, an incident that prompted global powers to attempt averting a broader Middle Eastern conflict. "We have to adjust, to expand them [the sanctions] on Iran," French President Emmanuel Macron said in Brussels ahead of the summit. "We are in favor of sanctions that can also target all those who help manufacture drones and missiles that were used in the attacks last Saturday and Sunday [13-14 April]." Israel has indicated its intention to retaliate, although it has not specified the means of response. Iran and Venezuela, which are among the founding members of oil cartel OPEC, have substantial oil reserves, with Iran having the world’s fourth-largest proven oil reserves and Venezuela holding the largest. Despite their influence on global oil prices, international sanctions have curtailed their production and export capabilities and market impact. "The lack of direction in the market reflects the significant uncertainty about Israel's possible response to Iran’s attack over the weekend," Dutch banking and financial information services provider ING said in a note. "However, for oil, sanctions are already in place, the issue is that they have not been strictly enforced for the last couple of years. And the big question is whether they will be enforced more rigorously now," it said. Keeping a lid on prices was poor March economic data from China, the world’s second-biggest economy. Chinese exports in March fell by 7.5% year on year, the biggest fall since August last year. March retail sales and industrial output also missed expectations, heightening concerns of muted demand from the world’s largest crude importer. The US, on the other hand, showed improved in economic activity from late February to early April, with firms indicating expectations for steady inflation pressures, based on a Federal Reserve survey released on 17 April. The Federal Reserve is currently not considering interest rate cuts in the near term due to a combination of resilient economic activity and persistently high inflation. In March, US employers added more than 300,000 jobs – the most in nearly a year – and retail sales exceeded expectations after expanding by 0.7% month on month. Focus article by Nurluqman Suratman An oil tanker at the dock of the El Palito oil refinery at Puerto Cabello, Carabobo, Venezuela – 13 March 2022. (Juan Carlos Hernandez/ZUMA Press Wire/Shutterstock)

18-Apr-2024

SAO PAULO (ICIS)–US manufacturers were "uniformly optimistic" in March about the prospects for the next 12 months on expected higher sales, the country’s Federal Reserve (Fed) Beige Book said on Wednesday. The Beige Book is a summary of US economic activity during the past six weeks among the 12 districts, one of which is the Federal Reserve Bank of Dallas. That bank includes all of Texas and northern Louisiana, the home of many petrochemical plants and refineries. The Beige Book published on Wednesday contains survey responses collected in the six week to 8 April. US manufacturing activity was in the doldrums in 2023 and beginning of 2024, but the manufacturing PMI index for March showed activity expanding for the first time in 17 months. Earlier this week, official data from the Fed showed manufacturing output expanding 0.5% in March. Increased recent demand may have been one of the reasons for manufacturers to feel reasonably optimistic for the months ahead. “Contacts were uniformly optimistic for the remainder of 2024, projecting steady to moderately higher sales moving forward; in one case, however, that still meant that total sales in 2024 would fall short of their 2023 levels,” said the Fed. “The positive forecasts were based largely on firms’ own recent demand trends, although one contact cited the prospects of productivity gains from AI and expected cuts in the federal funds rate as additional sources of optimism.” For the six weeks covered in the report, overall US manufacturing revenues were practically unchanged, with half of respondents reporting moderate gains in sales over the cycle and the other half experiencing moderate losses. In the Dallas district – the 11th District in the Fed’s terminology – the economy expanded modestly, propped by services and housing. However, the district’s manufacturing output “declined slightly”, with job creation slowing. “Employment growth slowed as wages, input costs, and selling prices grew at a moderate pace. Overall, Texas firms noted an uptick in uncertainty,” said the Fed. OVERALL, STEADY The overall US economic continued expanding in the six weeks to 8 April, with 10 out of 12 districts experiencing “either slight or modest” economic growth, up from eight in the previous report. Some downside economic risks remain, however, with labor shortages still being mentioned, although with the expectation that over the course of the next 12 months a more balance labor market could emerge. “On balance, contacts expected that labor demand and supply would remain relatively stable, with modest further job gains and continued moderation of wage growth back to pre-pandemic levels,” said the Fed. Price increases were practically unchanged from the last report, with logistics disruptions in the Red Sea and the collapse of Baltimore’s Key Bridge not leading yet to a significant increase in costs, despite some shipping delays. “Another frequent comment was that firms’ ability to pass cost increases on to consumers had weakened considerably in recent months, resulting in smaller profit margins. Inflation also caused strain at nonprofit entities, resulting in service reductions in some cases,” concluded the Fed. “On balance, contacts expected that inflation would hold steady at a slow pace moving forward. At the same time, contacts in a few districts – mostly manufacturers – perceived upside risks to near-term inflation in both input prices and output prices.” Thumbnail image shows an ExxonMobil plant in Beaumont, Texas. Photo courtesy of ExxonMobil

17-Apr-2024

LONDON (ICIS)–Eloise Radley, Energy Market Reporter, and Ignacio Sotolongo, Senior Editor at ICIS, sit down to discuss how geopolitics have impacted US oil production in recent years and how things could change if we see a new administration in November.

17-Apr-2024

SINGAPORE (ICIS)–Singapore's petrochemical shipments in March fell by 3.6% year on year to Singapore dollar (S$) 1.16 billion ($853 million), extending the 2% contraction in the previous month and weighing on overall non-oil domestic exports (NODX), official data showed on Wednesday. March non-electronic NODX down 23.2% year on year March manufacturing PMIs show continued expansion Singapore economy forecast to grow 1.0-3.0% in 2024 Overall exports of chemicals and chemical products in March fell by 37% year on year to S$3.54 billion, reversing the 5.8% expansion in February, Enterprise Singapore said in a statement. The country's NODX for the month fell by 20.7% – a much steeper decline from February’s 0.2% contraction – to S$14 billion because of a high base a year ago, with shipments to most major trading partners posting declines. March non-electronic NODX, which includes petrochemicals and pharmaceuticals, fell by 23.2% year on year to S$11.2 billion. Overall NODX to seven out of Singapore's top 10 markets fell in March, but shipments to Hong Kong, Taiwan and China rose. Singapore is a major manufacturer and exporter of petrochemicals in southeast Asia. Its petrochemicals hub Jurong Island houses more than 100 global chemical firms, including energy majors ExxonMobil and Shell. In the first quarter, the country’s economy grew by 2.7% year on year in the first quarter, accelerating slightly from the 2.2% expansion in the preceding quarter, according to official advance estimates. On a quarter-on-quarter seasonally adjusted basis, Singapore’s economy expanded by 0.1%, extending the 1.2% expansion in Q4. The manufacturing sector in Q1 grew by 0.8% year on year, moderating from the 1.4% expansion in the previous quarter. "Within the sector, output expansions in the chemicals, precision engineering and transport engineering clusters more than offset output contractions in the electronics, biomedical manufacturing and general manufacturing clusters," the Ministry of Trade and Industry (MTI) said. For the whole of 2024, Singapore's economy is expected to expand by 1.0-3.0%, compared with actual GDP growth of 1.1% growth in 2023, the ministry said. Manufacturing activity in Singapore improved in March, with the Singapore Institute of Purchasing and Materials Management (SIPMM) purchasing managers' index (PMI) inching up to 50.7, marking the seventh straight month of expansion. In contrast, a separate survey of private manufacturers by financial information and services provider S&P Global showed Singapore’s March PMI eased to 55.7 from 56.8 in February. Focus article by Nurluqman Suratman Thumbnail image: Singapore harbour and the Marina Bay Sands Hotel, 16 March 2023. (Franz Neumeier/imageBROKER/Shutterstock) ($1 = S$1.36)

17-Apr-2024

SINGAPORE (ICIS)–Japan's chemical exports rose by 3.9% year on year to yen (Y) 1.03 trillion in March, supported by higher plastic materials shipments abroad, amid the continued weakness of the yen, official data showed on Wednesday. The country's exports of plastic materials rose by 19.3% year on year to Y297 billion in March, Ministry of Finance (MOF) data showed. By volume, exports of plastic materials rose by 7.6% year on year to 513,959 tonnes. Shipments of organic chemicals, meanwhile, slipped by 2.2% year on year to Y199.4 billion in March. Exports of motor vehicles rose by 15.8% year on year to Y1.5 trillion in March, while shipments of motor vehicle parts were up by 3.7% at Y349 billion. Japan's overall exports rose by 7.3% year on year to Y9.47 trillion in March, up for the fourth straight month, while imports were down by 4.9% at Y9.1 trillion. This resulted in a trade surplus of around Y366 billion, the first in three months and reversing the around Y378 billion deficit recorded in February this year. By destination, Japan's overall exports to the US rose by 8.5% year on year while those to China were up by 12.6%. WEAK YEN PROVIDES TAILWIND FOR EXPORTSThe March trade data follows the yen sinking hit 34-year lows to the dollar beyond 154 yen this week as hopes of quick US interest rates receded amid persistent inflation. US Federal Reserve Chair Jerome Powell, speaking at the Washington Forum on the Canadian Economy on 16 April, said the US economy has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon. At 01:33 GMT, the yen was trading at 154.62 to the dollar. The US dollar extended gains on 16 April, with the US Dollar Index (DXY) rising to highs of 106.51 before closing around 106.06. Higher interest rates in the US make dollar-denominated assets more attractive due to higher yields compared to Japanese assets. Japan's finance minister Shunichi Suzuki on 16 April said that he is closely monitoring the yen's depreciation and are ready to implement all necessary measures to address the situation if needed. Japanese authorities intervened in the currency market in 2022 to purchase the yen on three occasions. "Jawboning from officials appeared to be an everyday affair with markets largely ignoring them for now as the move higher appears to be in line with recent market developments – higher US treasury yields while the Bank of Japan is still perceived to normalise slowly," Singapore-based OCBC Global Markets Research said in a note. The Bank of Japan on 19 March ended eight years of negative rates, ending the country’s historic era of negative interest rates, but this has failed to stop the slide in the yen. In a statement announcing the policy change, the central bank said that the economy has “recovered moderately” and that it is “highly likely that wages will continue to increase steadily.” Focus article by Nurluqman Suratman

17-Apr-2024